Shares rose 2.66% to $179.45 on Tuesday.
The firm downgraded the stock last year on concerns about the monetization plans for its "stories" platform as well as a lack of growth drivers for the company past Facebook and Instagram.
However, Nathanson said he now believes that the company's future is brighter than he previously thought.
"Now, less than a year later, each of our main concerns around the health of Facebook's business has been addressed. Facebook's organic growth deceleration has steadily moderated, due to stronger than expected Stories monetization. Meanwhile, cost growth is coming in lower than expected, leading us to project margins stabilizing in the low 40s rather than falling to management's prior long-term guidance in the mid-30s," Nathanson wrote.
The company has a "new act" that will help drive growth in the future.
"Meanwhile, Facebook appears to have not just one new act on the horizon, but possibly two - commerce and messaging are both shaping up to be growth drivers longer-term. These opportunities do not appear to be captured in the stock at this point," Nathanson wrote.
It's not all clear sailing for the company, however, as the domestic and international regulatory risks that have weighed on the stock still loom. But Nathanson isn't too worried.
"As regulatory risk has been brought into the spotlight given news last week around a potential FTC probe as well as a House Judiciary Committee investigation, we believe much of that risk is now priced into Facebook's stock. Antitrust action still seems unlikely given the focus of U.S. courts on proof of consumer harm," Nathanson wrote.
Facebook is a holding in Jim Cramer's Action Alerts PLUS charitable trust.