The virtual goods market, led by growth in purchases from companies such as Zynga ( ZNGA), lets Facebook diversify its revenue from strictly advertising. Facebook takes a 30% cut from the goods purchased on its platform, similar to what Google and Apple ( AAPL) do with their app stores. This market is expected to reach $14 billion by 2016.

There are several caveats Facebook investors should be aware of, however, including slowing growth, sequential decline in revenue, and potential challenges in China.

Bhatia notes that carving out a firm presence in China is difficult, as Google has shown. Compliance with Chinese regulatory authorities, for example, is difficult and addressing Chinese culture poses challenges, particularly in the face of incumbents such as Renren.

Facebook has said that it wants to touch each of the world's 2 billion Internet users. It already has over 900 million users, so there's potential for 1.1 billion more, or just over half of the world. "While we expect Facebook to benefit from an increasing base of internet users and to be able to achieve higher penetration rates of internet users, the hyper growth of past years is unlikely to be matched simply due to the law of large numbers," Bhatia said in his note.

Then there are the concerns about slowing revenue growth. Facebook said that revenue grew 45% year-over-year in its first-quarter, but that was down from 55% in the fourth quarter 2011 and 104% in third-quarter 2011. This could be a seasonal decline, but it's something investors will need to be aware of, especially given the hype surrounding Facebook.

Facebook is starting its roadshow for its IPO and is expected to go public late next week, either May 17 or May 18.

Interested in more on Google? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>Contact by Email.

If you liked this article you might like

Why Alex Rodriguez Is Investing in Billionaires Warren Buffett and Jeff Bezos

Former NY Yankees Slugger Alex Rodriguez Reveals One Juicy Investment Tip

Why I Love Apple, Alphabet, Nvidia and These Other Stocks for September

Have Amazon, Google, Apple and Sony Flooded the Smart Speaker Market?