Facebook: Instagram's the 'Key' to Keeping Growth Chugging -- Barrons.com
3:28 pm ET June 11, 2018 (Dow Jones) Print
By David Marino-Nachison
Instagram could drive most of Facebook's (FB) growth by the start of the next decade.
On Sunday, KeyBanc analysts said they see the photo-and-video sharing service as "the key to the next leg of growth" at the Barron's Next 50 company thanks to its advertiser-friendly visual focus backed by Facebook's data and targeting ability.
"Core Facebook is clearly maturing, with ad load reaching a saturation point and pricing the last lever to pull, so we see Instagram driving an increasing portion of incremental advertising growth," they wrote, estimating that it could account for more than a quarter of Facebook's total 2020 ad revenue.
KeyBanc's reasoning assumes a considerable slowing of ad revenue growth for the "core" Facebook product, though it notes that if Messenger or WhatApp begin to deliver substantial revenues that could change.
Earlier this year, we shared another take on why investors should consider Instagram an important part of the Facebook story. (And we covered some upgrades to Instagram's business tools.)
That one, however, had the distinction of being published as most folks were paying attention to the spreading Cambridge Analytica scandal. Indeed, it has been a news-filled year for Facebook, shares of which are up about 6% in 2018.
KeyBanc's analysts are among Wall Street's more bullish on Facebook. Their $245 price target on the shares is roughly 27% above current levels and ahead of the current mean, around $221, as tracked by FactSet.
Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron's next at @barronsnext .
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