Sterne Agee analyst Arvind Bhatia has said Facebook’s (NASDAQ:FB) recently announced data use policy changes and the statement of rights and responsibilities may hint at the arrival of advertising on photo-sharing service Instagram. Consequently, Bhatia raised his price target on Facebook to $32 a share from $26 a share while reiterating a buy rating for the stock.
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Facebook acquired Instagram in April this year for what was then a total of $1 billion in cash and stock options, but has largely left the app with approximately 39 million monthly active users unchanged.
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“This [the policy] change could be an indication that Facebook is planning to monetize Instagram in the near future, as it would allow Instagram to use Facebook’s data to personalize the user experience and perhaps target advertisement,” Bhatia wrote in his note to investors. “We believe most estimates currently do not factor Instagram monetization yet due to the uncertainty on the timing.”
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The potential changes specific to Instagram as well as Facebook’s improved visibility on mobile are two factors that are likely to result in much good news for the company soon, the analyst said. Bhatia wrote that the company’s strong mobile performance in the third quarter has helped ease most investor concerns.