Facebook Q1 Paints A Picture Of Strength; Video To Come To The Fore This Year

UBS raised its price target for Facebook Inc FB Thursday after the social media platform reported first-quarter results that analyst Eric J. Sheridan called "solid."

Facebook reported a Q1 EPS of $1.04 after the close Wednesday, missing estimates by $0.08; sales of $8.032 billion, beating estimates by $202 million; and 1.28 billion daily active users, an 18 percent increase year-over-year.

Video consumption, publication and monetization will become central to both Facebook and Instagram's business in 2017, Sheridan said in a note.

UBS maintains a Buy on Facebook and raised its price target from $165 to $168.

"Facebook remains among the best-positioned companies to capitalize on the monetization of mobile engagement and our checks indicate no change to that trajectory in the medium term," Sheridan said.

Bullish Ad Revenue Projections

UBS estimates Facebook's advertising revenue will grow at a 28-percent compound annual growth rate between 2016 and 2019, with much of that growth driven by increased revenue from Instagram and "strong" Facebook revenue.

"Specifically, we believe the secular shift toward mobile, growth in users and engagement and ad innovations … will drive Facebook's [ad revenues] over the next few years," Sheridan said.

Messenger, WhatsApp And Oculus

Facebook's emerging businesses — Messenger, WhatsApp and Oculus — aren't projected to contribute substantially to the social platform's revenue in the medium term, Sheridan said.

The messaging and virtual reality platforms could present long-tailed opportunities "given sizable runway and multiple paths to monetization," the analyst said.

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