Facebook Inc (Nasdaq: FB) delivered some impressive revenue growth and equally impressive shareholder returns in recent years. However, the next leg of the Facebook growth story may just be getting started.
Jefferies analyst Brent Thill says Facebook Watch, the platform’s video streaming tab, will be a cash cow for the social media giant. Streaming video is a relatively untapped market for Facebook, but Thill says Facebook’s massive user base of more than 2 billion people provide an unprecedented opportunity for the company to monetize its video content.
[See: 7 of the Best Stocks to Buy for 2018.]
Watch has only been around for about four months, but Thill predicts it could be generating $12 billion in revenue by 2022.
“The Watch tab should drive video engagement and will also provide additional network effects and sharing,” Thill wrote on Wednesday, according to CNBC.
“We like FB’s data-driven approach to content creation and partner revenue share agreements as it manages content investment.”
In September, the Wall Street Journal reported that Facebook is willing to spend as much as $1 billion on original video content in the next year.
The cord-cutting movement has pushed the video audience away from traditional TV and toward over-the-top streaming services such as Netflix ( NFLX), Amazon.com ( AMZN) Prime Video and YouTube. But now that TV has gone online, companies such as Facebook, Snap ( SNAP) and Twitter ( TWTR) are hoping the next step in the evolution of TV is for video to become more integrated into social media.
Facebook has a lot of ground to make up to challenge Netflix and YouTube in the streaming video market, but Thill and other analysts recognize the tremendous advantage that Facebook’s massive user base provides.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
RBC Capital analyst Mark Mahaney says Facebook Watch is an exciting opportunity for investors. “The future use of video and especially content creation at Facebook in the Watch tab could be a compelling engagement and monetization opportunity for Facebook at some point in the future,” Mahaney says.
According to RBC Capital’s recent social media survey, 91 percent of U.S. social media users currently have a Facebook account, more than double the 42 percent who have a Twitter account and the 31 percent who have a Snapchat account.
Jefferies has a “buy” rating and $225 price target for Facebook. RBC has an “outperform” rating and $195 target for FB stock.
More from U.S. News
6 Things to Know About Mark Zuckerberg’s Manifesto
9 Investing Myths That People Still Believe
8 of the Most Incredible Investments of the 21st Century
Facebook Inc (FB) Watch Is a Massive Opportunity originally appeared on usnews.com
