E-commerce on Instagram could be a big revenue driver in the future, say analysts at Morgan Stanley, prompting them to raise their price target on the stock. 

Facebook shares were up 2.06% to $178.54 in early trading Tuesday. Shares are up about 29% year-to-date. 

Morgan Stanley's new price target is $195 a share, up from $190. The new price target is 11% above the stock's current level. 

"Instagram commerce is top of investors' minds," wrote Morgan Stanley analyst Brian Nowak. "We are bullish Instagram's commerce opportunity." Nowak believes the e-commerce strategy Facebook wants to initiate on Instagram advertisements will add $4 billion of revenue in 2021. "We see large and small brands/retailers leveraging Instagram's leading reach, data, and 'browsing/aspirational' behavior to grow their online businesses," Nowak said. 

Nowak explained that advertisers could be willing to pay as much as a 10% commission on sales resulting from click-throughs on the ads, which would give them a roughly 10-times return on ad spend. He noted that a lot of advertisers currently see a 3-to-6 times return on ad spending on Alphabet's Google (GOOGL - Get Report) . 

Still, "the commerce opportunity isn't likely to be fast or easy either," Nowak said. He is first looking for Facebook to solidify its new payments offering, which would facilitate transactions on products that users buy through the ads. This way, "FB can more directly link ad dollars to transactions." Barclays analyst Ross Sandler says Facebook payments revenue, with its 'Facebook Coin' product could total $21 billion in 2021

Nowak raised his 2019 revenue and GAAP earnings per share estimates slightly, but raised his 2021 estimates to revenue of $102.12 billion from his previous expectation of $100.38 billion. He raised his 2021 EPS estimate to $10.25 from $10.08. 

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