Facebook Remains Oppenheimer's Top Large Cap Pick For 2017; Here's Why

Given the rash of negative stories surrounding Facebook Inc FB these past few months, and the fact that shares are down nearly 9 percent from their 52-week high, it's easy to see a scenario where investor sentiment cools on the social media giant.

But not Oppenheimer's Jason Helfstein. Helstein named Facebook as the top large cap pick for 2017, maintaining his Outperform rating and $144 price target. He sees “multiple reasons to be positive" on the stock this year. 

• Shopping ads had gained significant traction during the holidays
• Facebook usage had surged ahead of the US presidential election
• Instagram momentum appears to be accelerating, driven by product innovation

Growth Drivers In 2017

Helfstein expects Facebook’s Dynamic Product Ads [DPAs] and Instagram to become the “more prominent growth drivers in 2017.”

Spending on Facebook’s DPAs surged 202 percent year-over-year during the holiday shopping season. Although DPAs offer better return on investment than other social ads, the spend market share for DPAs remains significantly below its share of clicks. This suggests “substantial pricing upside” for DPAs, which would likely become “a prominent growth driver for FB in 4Q:16 as well as 2017,” the analyst mentioned.

In December 2016, Instagram announced 600M monthly active users globally, with 75-80 percent users outside the US. Instagram recorded accelerating user growth as well as improved user retention, on the back of more engaging social formats.

Helfstein noted that the trends “gives us confidence” that Instagram would be “a leading social platform for millennials going forward.”