There’s no shortage of Facebook (Nasdaq: FB ) bears. Facebook bulls, on the other hand, are somewhat harder to come by. Well, that camp has one prominent analyst within its ranks that thinks investors should pick up some Facebook shares.
The Munster Mash
Piper Jaffray analyst Gene Munster is out with some bullish comments today. Of course, Munster is one of the most prominent and vocal Apple (Nasdaq: AAPL ) bulls in the universe, and has been pounding the table for years on end (don’t his hands hurt by now?) to invest in the Mac maker. For example, Bloomberg Businessweek ran a profile on the longtime Apple bull back in April, and compiled a graphic showing how Apple has performed relative to his price targets over the years.
Source: Bloomberg Businessweek.
Some of Munster’s product predictions haven’t panned out, such as when he said in 2009 that Apple would release an Apple TV by 2011. That was even before the first iPad was unveiled, and he was already talking TV. When it comes to the overall financial performance, though, Munster still has a respectable iTrack record.
The new apple of Munster’s eye
As bullish as Munster has been on Apple over the years, he’s now turning his attention to the dominant social network, and his sentiments echo those he felt about Apple in earlier times. He thinks Facebook’s future potential growth is monstrous relative to other large tech companies, and shares are now trading at a substantial discount.
One potential catalyst he predicts on the horizon is, potentially, the addition of a "want" feature, which would be similar to the site’s popular "like" button that has become a social phenomenon. A "want" could be used for the benefit of advertisers using Facebook’s Sponsored Stories push, which is one of its important moves towards mobile monetization.
Sponsored Stories are off to a strong start, with CEO Mark Zuckerberg saying on the last conference call that, at the end of June, they were up to a run rate of over $1 million in daily revenue, with half of that coming from mobile. Imagine a user seeing a Sponsored Story about a product that a friend just purchased, and instead of merely "liking" it with a click, they felt strong enough that they could click a "want" button. That’s a user that you can bet advertisers will pay top dollar to pitch to, and it’s a social angle that Google (Nasdaq: GOOG ) would have a hard time replicating, as its Google+ network still lags in users relative to Facebook’s.
Munster rates Facebook shares at "overweight," complete with a whopping $41 price target. To date, the only time Facebook has reached that high was when it briefly touched $45 on its IPO day, only to come crashing down. His target represents over 100% upside from current prices, so Munster is hoping for shares to double in the near future.
On the flip side, Munster acknowledges that Facebook has another lock-up expiration coming on November 15 that could add some selling pressure, as freshly released shares hit the market. Still, he doesn’t see any major long-term effects after the expiration.
Stop me if you’ve heard this one before
Back in June, he told CNBC that investors who were focusing too much on the near-term are "missing the whole point," but when looking at the long-term, it was a "no-brainer." Munster also believes Facebook will start playing a larger role in e-commerce, as it further taps its platform. He makes a strong case for opportunities in e-commerce and, if you believed him then, when shares were trading near $32, then today’s prices closer to $19 are a downright steal.
I’ve been keeping a close eye on Facebook, myself, and there are numerous reasons I’m bullish on its long-term prospect, I remain on the sidelines, however, until the valuation stars line up with its monetization abilities. Grab a copy of this premium report, where I break down Facebook’s monetization throughout the world, and look at what it would take before I’d consider it a buy.