Stay Tuned For Facebook TV: Ad Sales Will Fund Big Bet On Video

Booming ad revenues should provide enough fuel for Facebook Inc FB to barrel aggressively into video and TV-style programming, a Credit Suisse analyst said Thursday.

Stephen Ju maintains his Outperform rating and raised the target price to $190 from $180. Facebook was up 3.59 percent at $171.56 at publication time.

Facebook reported stronger-than-expected results for its second quarter on Wednesday. Second-quarter earnings came in at $1.32 per share, topping estimates by 19 cents. Facebook delivered sales of $9.321 billion in the quarter, $121 million higher than analyst estimates.

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“From a medium-term product point of view, the rising profit pool from mobile/newsfeed affords FB more room to invest aggressively into its video initiative (both infrastructure and content).” Ju wrote.

“We believe the most important takeaway is the acceleration in year-to-year ad price growth to reach +24% (vs 1Q17's 14%) along with the deceleration of ad impression growth to 19% YOY (vs 1Q17's 32%). 2Q17 results in our view serve as a stronger signal for upside potential for 2H17 and should drive greater urgency among investors to add to FB positions.”

He said his end-of-2018 target price increases to $235 versus the prior $220. “Slower-than-expected advertiser adoption either on a product-by-product or regional basis for Facebook's various ad units is a risk to our estimates,” he wrote.

Facebook CEO Mark Zuckerberg has said that video will become the primary driver of Facebook for the future.

Related Link: Facebook’s Stock Has Another 25 Percent Upside Despite Some Problems Ahead, Analyst Says