Ives also raised his price target on Facebook’s stock from $210 to $225. If realized, this would mark a nearly 20 percent increase from Thursday’s close. Facebook shares were down around 3.7 percent in pre-market trade on Friday.
Facebook does not break out figures on how much ad revenue Instagram brings in. But eMarketer forecast in December that ad revenues from the platform would grow from $4.10 billion in 2017 to $10.87 billion by 2019.
The social media titan also plans to increase investment this year which could lead to expense growth of between 45 percent and 60 percent. This will go toward increasing the headcount of employees working on tackling content that violates the company’s rules, but also investing in the “Watch” tab — its original video content project.
For Ives, “Watch” remains a “major wild car” however, but increasing investment will help the company in the long run, though it could hold back shares in the short term.
“This higher investment profile could be a lingering cloud over Facebook’s shares in the near term … And a small speed bump until investors can get further comfort that these investments are fueling the next phase of the growth story for 2018 and beyond with margin improvement set to kick in for 2019,” Ives said.
Many analysts are very bullish on Facebook’s prospects in 2018, but there are some concerns. Michael Nathanson, an analyst at Wall Street firm MoffettNathanson, outlined some reasons why Facebook’s stock could go lower in 2018.
In a note last month, Nathanson said that its video strategy still remains a mystery, and that there is still a “major question mark” over whether Facebook can monetize its other platforms like WhatsApp and Messenger. With Wall Street overwhelmingly positive on the stock, any hiccup in growth could make a downside reaction amplified, according to Nathanson.
