Catalysts that could drive Facebook Inc’s share price higher

CEO Mark Zuckerberg talks about Messenger app during the Facebook F8 Developer Conference, Wednesday, March 25, 2015, in San Francisco.

Facebook Inc. has already paid off handsomely for investors since making its market debut this year, but the social networking giant doesn\’t have shortage of catalysts to help drive its stock price even higher within the next 12 months, says Neil Doshi, analyst at Mizuho Securities USA.

“FB is evolving into a true platform where people are spending additional time on the site,” Doshi said in a note to clients, initiating coverage around the company having a buy recommendation and US$104 price target.

“Despite the shares being up nearly 38% over the past year, we firmly think that FB has multiple near- and long-term legs of growth, new business optionality and potential for further margin expansion over time,” he said.

Doshi’s price target around the stock represents an upside of approximately 20 per cent from its current price near US$87. That makes it his “top large cap Internet pick.”

He said Facebook is benefiting from strong video advertising and really should get a boost in the mid-term from the Instagram business.

“Our analysis suggests that Instagram should reach over 1 billion members by the end of 2018, with annual revenue well over US$3 billion,” he explained. “Given the strong user growth and revenue potential, we value Instagram at US$26 billion.”

Doshi also believes Facebook’s foray into new platforms such as Facebook Messenger and WhatsApp will result in longer-term benefits for that company.

“We believe Facebook can monetize these services through ads, commerce and games and provide a platform for other online services like payments, ordering food and hailing taxis,” he said.