Updated from 10:47 a.m. to include additional information about WhatsApp.
Credit Suisse analyst Stephen Ju upgraded shares to "outperform" from "neutral," raising his price target to $87 from $65, as he believes the company can earn vastly more from its 1.2 billion users with a combination of existing products and future ones.
"Our point of differentiation with this report is in the explicit product-by-product deep dive and projections for existing desktop and mobile products, as well as the upcoming Premium Video ad unit and Graph Search versus the simplistic ARPU growth assumption," Ju wrote in the note. "This analysis leads us to conclude the following key motivators for our ratings change: 1) Facebook will be able to drive revenue growth without a material lift in ad loads, 2) Street models are too conservative and underestimate the long-term monetization potential of upcoming new products, 3) optionality and upward bias to estimates do not contemplate contributions from multiple other products (Offers, 3P mobile ad network, etc.)."
He now expects Facebook to earn $1.17 a share in 2014, down from $1.28 a share, but Facebook will make it up in the years to come. He expects Facebook to earn $1.67 a share in 2015, down from $1.82 a share, but $2.77 a share in 2016, up from $2.40 a share.
Shares of Facebook were higher in early Tuesday trading, gaining 3.3% to $63.23.