Facebook (NASDAQ: FB) announced big changes to its News Feed on Thursday, but that's not worrying one analyst who upped his outlook on the stock, expecting nearly 20% upside from the current price.
CEO Mark Zuckerberg said the News Feed — one of the key areas where the social network shows ads — will begin to prioritize "meaningful social interactions" versus "relevant content." This means users will start to see more posts from friends rather than publishers.
Zuckerberg added that he expects the time spent on Facebook will go down, but "will be more valuable."
This could hit publishers that rely on traffic from Facebook, but Daniel Ives, head of technology research at GBH Insights, said he is not worried because the social networking giant has "strong monetization tailwinds" in 2018, thanks to a monthly active user (MAU) base of more than two billion.
"Facebook will continue to grow its massive global installed base in our opinion while importantly monetizing users especially on the Instagram side of the house, which remains the 'core 1-2 punch' that underlies our bullish thesis on the name," Ives said in a note released late Thursday.
Ives also raised his price target on Facebook's stock from $210 to $225. If realized, this would mark a nearly 20% increase from Thursday's close.
Facebook does not break out figures on how much ad revenue Instagram brings in. But eMarketer forecast in December that ad revenues from the platform would grow from $4.10 billion in 2017 to $10.87 billion by 2019
The social network’s stock plummeted $10.11, or 5.4%, to $177.66