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SunTrust's Peck Issues 4 Big Takeaways from F8 (FB)

March 26, 2015 7:42 AM EDT
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Price: $196.64 --0%

Rating Summary:
    46 Buy, 17 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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SunTrust Robinson Humphrey analyst Robert Peck issued his 4 big takeaways form Facebook (NASDAQ: FB) F8 conference:

#1 Messaging is the New Portal. Internet 1.0 was popularized by portals like Yahoo! and AOL. The traditional portal was where everyone started their day. On PC, Facebook eventually morphed into a portal-like service. On mobile however, it is different - Messaging is becoming the next generation of portals. Consumers start their day checking messages, they are also consuming more and more general news, pictures, and videos. Moving across the verticals, one of the next logical steps is eCommerce and payments, which Messenger Platform would enable. Further, Facebook would not only help create deeper relationships for brands, but have access to direct sales information, "closing the loop" in advertising allowing Facebook to demonstrate direct ROI from various types of ads. Lastly, enabling app discovery through Messenger could also present further monetization opportunities. We estimate that the eCommerce and Payment opportunity alone could present a >$2B opportunity.

#2 Parse is Attempting to be the "OS" of the Internet of Things. Facebook cited that there are currently >5B devices currently connected to the Internet which is expected to increase to 25B in 5 years. With over 400K developers and 1.4B users, we believe the Parse technology that helps connect these devices has the potential to make Facebook the "OS" for them, as they track and communicate information to consumers via Facebook. The IoT permeates all areas of the economy (Cisco identifies the market as a $19T opportunity) and we think being the app entry point and "OS" could further expand Facebook’s importance and eCommerce, advertising, and payments opportunities.

#3 Expanding Facebook’s Reach/TAM with People Based Marketing. We think the functionality of Facebook Audience Network (FAN) combined with LiveRail (now video and display) expands Facebook’s reach off of Facebook (think Google's AdSense) and fully enables People Based Marketing. Developers we have spoken with are extremely excited about this opportunity – this is a direct competitor to Twitter’s MoPub and Google’s AdMob, and leverages Facebook's extremely rich user and targeting data. We estimate FAN presents a ~$1B opportunity. Further, Facebook is pursuing direct publishing from media publishers, such as BuzzFeed & NY Times and announced the ability to share and embed Facebook videos. Content discovery is a key component to enabling greater monetization and with the new video player, Facebook is a more direct competitor to YouTube in sharing and discovering videos (YouTube was estimated at >$4B in revenues for 2014).

#4 Spherical Video Paints Picture of the Future. While spherical videos are likely more indicative of future media content, we think they are engaging and can be attractive to professional producers of high quality content. This ties in well with Facebook’s view of augmented / virtual reality for future growth plans.

The firm maintained a Buy rating and price target of $90.00

For an analyst ratings summary and ratings history on Facebook click here. For more ratings news on Facebook click here.

Shares of Facebook closed at $82.92 yesterday.



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