Even as Facebook (NASDAQ:FB) sits within spitting distance of all-time highs of around $82, the social network could very well be poised for continued gains from here. In fact, one Wall Street analyst has just set a price target of over $100 per share. At that price, Facebook would be readily approaching a $300 billion market cap, just 11 years after being founded.
Can the social network reach triple-digit prices?
Word on the Street
The analyst we're speaking of is Credit Suisse's Stephen Ju, who stood by his "outperform" rating earlier this week. Meanwhile, Ju notched his price target on Facebook from $88 to $102, citing optimism around Facebook's relatively new mobile ad network Facebook Audience Network, or FAN.
FAN was introduced last April. At the time, Facebook pointed out that many mobile apps that use in-app advertising don't work well for advertisers because they frequently don't display relevant ads.
FAN hopes to change this by allowing Facebook ad campaigns to extend to third-party mobile apps, while offering mobile-friendly formats for a better experience. Facebook has proven that its ad targeting is quite effective, especially on mobile, thanks to the copious amounts of user data that it has at its disposal.
The network started off as a small pilot, and Facebook opened it up to all 1.5 million of its advertisers in October. Facebook Audience Network has the potential to dramatically broaden Facebook's ability to connect app developers with advertisers, while collecting a fee for its highly scalable troubles. In doing so, the mobile ad network will boost the ad inventory that Facebook is able to sell.
Ju estimates that Facebook Audience Network could generate upwards of $1.1 billion in revenue in 2016. That total is on a gross basis, and Facebook's cut could add up to nearly $220 million. That may not seem like a game changer relative to Facebook's current TTM revenue base of $11.2 billion, but keep in mind that Facebook Audience Network is an incremental opportunity that doesn't cannibalize News Feed. Consider it at $220 million cherry on top – that may grow to over $5 billion by 2020 based on Ju's estimates.
Facebook is uniquely positioned to offer a compelling value proposition to both advertisers and developers, since there aren't many competitive mobile options for developers to monetize their apps.
Not the one and only
It turns out that Ju isn't the only analyst with a price target of over $100. Pivotal Research had already set a price target of $102, but kicked that target up a few dollars to $105. The tweaking was related to a change in Facebook's cost of capital based on the changing interest rate environment. Pivotal Research is bullish on Facebook for many other reasons, and considers it a top pick in social media.
It's been less than 3 years since Facebook went public, but the company and Mark Zuckerberg have both matured and evolved in significant ways. Facebook is now dominating in mobile ads while building a diversified portfolio of independent platforms that will cement its place in the mobile web. Hitting $100 will just be the beginning
Evan Niu, CFA owns shares of Facebook. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.