Facebook Emerging Businesses Have Strong Growth Potential

NEW YORK (TheStreet) -- Facebook  (FB) shares are rising as analysts at UBS have bumped up the company's earnings estimates, ahead of the company's second-quarter results.

UBS analysts Eric J. Sheridan and Vishal J. Patel reiterated their "buy" rating and $90 price target for Facebook, noting Facebook's emerging businesses are future growth drivers which "give us greater confidence in the long-term growth trajectory."

Premium Video Ads and Instagram, are each forecast to garner $1 billion in revenues by 2017 and 2018, respectively, and have the potential for especially strong growth. Analysts questioned the Instagram purchase in 2012, but the acquisition has proved  to be a successful one. At the time of the acquisition, Instagram had 15 million users; it now has over 150 million.

Here's What It Looks Like Inside Tesla's Massive Factory

Here's What It's Like to Work for Elon Musk

The analysts also look favorably on WhatsApp, the mobile messaging service Facebook announced it was acquiring earlier this year. Sheridan and Patel argue that WhatsApp's "scale, global/cross-platform availability & straightforward user interface serve as strategic strengths" and estimate that it will reach $1 billion in revenue by 2018.

Facebook announced it was purchasing WhatsApp in February for $19 billion--$4 billion in cash, $12 billion in Facebook stock, and $3 billion in restricted stock units. At the time of the acquisition, WhatsApp had 450 million people monthly active users, and was gaining around 1 million new users each day.

The analysts also predicted that another recent Facebook acquisition, the virtual reality company Oculus Rift, will reach $500 million in revenues by 2018. Oculus was purchased in March for $2 billion, the vast majority of it again in shares. Facebook CEO Mark Zuckerberg said that the company "has the chance to create the most social platform ever, and change the way we work, play and communicate."

Sheridan and Patel upwardly revised their estimate of Facebook's compound annual growth rate (CAGR), as they now expect CAGR to be 23% from 2015 to 2018, up from a prior view of 17%. The CAGR estimate for EBIDTA during the same period was raised to 24% from 19%.

Facebook shares were higher in early Tuesday trading, gaining 0.31% to $65.49.

--Written by Laura Berman in New York

>Contact by Email.

If you liked this article you might like

Using Twitter to Trade Stocks

Using Twitter to Trade Stocks

Buy Stocks That Are Right for You: Cramer's 'Mad Money' Recap (Friday 2/16/18)

Buy Stocks That Are Right for You: Cramer's 'Mad Money' Recap (Friday 2/16/18)

How Jim Cramer Knew to Sell Just Before The Dow Jones Industrial Average Tanked

How Jim Cramer Knew to Sell Just Before The Dow Jones Industrial Average Tanked

General Electric Is One Mega-Cap Stock You Must Still Avoid

General Electric Is One Mega-Cap Stock You Must Still Avoid

Stock Markets Are Booming Again but Panties Prices Continue to Plunge

Stock Markets Are Booming Again but Panties Prices Continue to Plunge