Facebook Inc (NASDAQ:FB) is enjoying a good start to 2017, with FB shares already trading 11% higher since the first trading day of the year. Facebook didn’t end 2016 so positively with the stock closing the year roughly 13.7% off its 52-week high. However, the opening rally it has enjoyed means that Facebook stock is now only roughly 3.4% off its 52-week high.
Can FB shares continue their ongoing rally to reach the 52-weeks high again and even surpass it?
The quick answer: Yes. That’s definitely on the cards, especially going by what Wall Street folks are saying. In fact, 22 analysts believe Facebook is a buy, 22 analysts rate it as outperform, 3 analysts say it’s a hold. None of the analysts currently say that investors should sell Facebook stock. The average price rating on Facebook is currently $154.36 a share, meaning Wall Street believes FB shares carry a 23% upside potential.
With that in mind, here’s a quick look at the top reasons Wall Street RBC’s Mark Mahaney is so bullish on Facebook stock.
Facbook’s Expansion Into China
China banned FB in 2009 in the wake of Urumqi unrest in July 2009 in order to control flow of information about the unrest. RBC Capital Markets’ Mark Mahaney predicted that China would reopen its door to Facebook in 2016, but it didn’t happen. He believes it could happen this year, given reports in November 2016 that FB had developed software with the capability of controlling posts that appear in certain geographic regions.
Aegis Capital’s Victor Anthony is also upbeat of Facebook’s chances in China.
With Facebook on course to reach 2 billion users this year without China, the opportunities become bigger once China allows FB in its country again. Keep in mind that China currently has the largest number of internet users globally.
FB Stock and Growing Ad Dominance
Cowen Group recently published its 2017 Proprietary Ad Survey and the results showed that Facebook is becoming increasingly important to digital ad buyers who are moving away from TV advertising.
Cowen’s John Blackledge noted that Facebook is demonstrating social leadership, with roughly 75% of ad dollars being apportioned to the central Facebook platform as well as Instagram. The success here is a result of FB’s first-in-class targeting capabilities.
In addition, Cowen’s survey found that FB’s appeal as a video advertising platform is growing as well. The survey showed that 17% of ad buyers consider using Facebook Video for a distinct campaign. In 2015, only 10% of respondents would consider doing so. Again, with FB’s targeting capability, brands will only become more attracted to Facebook Video advertising.
Oppenheimer’s Jason Helfstein also noted that spending on ads increased during the 2016 holiday season, meaning there’s a “substantial upside to pricing” FB ads because increasing demand gives companies opportunity to raise prices. And the fact that it has the best targeting capability helps as well.