A strong performer on the stock exchange since its 2012 initial public offering (IPO), Facebook (NASDAQ:FB) is well positioned to do even better. That's according to a new analysis of the stock from analyst Lloyd Walmsley at Deutsche Bank, who has raised the target price of the shares to a new "street high."
Walmsley's new level is $385, from the previous $355. The former is more than 32% above Facebook's most recent closing price. He's maintaining his buy recommendation on the stock.
The prognosticator believes that ad spending, a crucial source of revenue for the company, will see a rise. He also feels that worries about upcoming changes Apple is making to its user privacy settings will become less of a factor in market sentiment.
"We think investor focus is starting to shift away from fears around iOS changes toward a continued ad recovery and benefits from more eCommerce activity shifting into Facebook's platform," Walmsley wrote in his research note explaining the price target hike.
Facebook already has a massive user base, so it can't rely on significant improvement in those numbers to drive its business forward. Rather, it will be reliant on expanding advertising take and other revenue sources for meaningful growth. Walmsley thinks that it has several levers it can pull for this, including the Tik Tok-like Reels video feature in Instagram. He's estimating that Reels can potentially pull in $21 billion in revenue.
Investors seem to be buying this argument. On Monday, Facebook shares trounced the S&P 500 index by rising to close 2.8% higher on the day.