Negative headlines about Facebook, Inc. (Nasdaq: FB) data security dominated the Facebook news cycle so far this year. However, Facebook’s underlying advertising business is booming, and analysts say FB stock is the best play on the explosive growth in mobile internet usage.
Facebook investors got more bad news on the data front this week following reports that the Department of Justice is broadening its investigation of Facebook data practices and will be coordinating with the Federal Bureau of Investigation, the Securities and Exchange Commission and the Federal Trade Commission.
While Facebook investors will likely face more uncertainty and potential negative headlines in the near term, BTIG analyst Richard Greenfield says Facebook’s users and advertisers “could not care less” about all the data drama.
“Despite all the noise around Facebook, Instagram has become an absolute monster in terms of user growth and engagement (with Instagram now over 1 billion users per day and Instagram stories over 400 million),” Greenfield says.
He says the fact that Instagram Stories has grown to twice the size of Snapchat (SNAP) in only two years is remarkable. Greenfield says Instagram has become the most powerful and valuable digital shopping mall in the world where users can browse and buy anything they see. Even many of Instagram’s advertisements are entertaining rather than annoying.
Greenfield says the Instagram model of merging entertainment and advertising could be a tremendous long-term growth opportunity that is still in its nascent stage. Instagram’s user count just keeps getting higher, but BTIG estimates there is still $70 billion being spent on traditional TV advertising despite plummeting ratings.
Greenfield says Facebook users feel the platform is a necessity for staying connected to the world, and Instagram is increasingly becoming the most popular cure for boredom on mobile devices.
Thanks to the Instagram momentum, BTIG has raised its 2018 Facebook revenue growth projection from 32 percent to 41 percent and its 2019 growth projection from 24 percent to 32 percent. BTIG is now modeling $95.4 billion in revenue for Facebook in 2020, well above consensus estimates of $87.5 billion.
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