Updated from 10:47 a.m. to include additional information about WhatsApp.

NEW YORK (TheStreet) -- Ahead of earnings on Wednesday, Facebook (FB) - Get Report is getting a boost, as one analyst believes the company's earnings power is being severely unappreciated by Wall Street.

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.

Facebook reports first-quarter earnings Wednesday after the close of trading. Analysts surveyed by Thomson Reuters are expecting the Menlo Park, Calif.-based social network to earn 24 cents a share on $2.36 billion in revenue.

Key drivers in Ju's ratings upgrade are the Mobile Newsfeed, Mobile App Install, Instagram, the company's upcoming plans for premium video, as well as Graph Search, which was announced at the start of 2013.

"Facebook is on the cusp of a multiyear value creation cycle with the release of new products, including Premium Video, Graph Search, as well as Instagram advertising -- we believe that these ad units can be layered on top of existing desktop and mobile ad formats without posing material risk to consumer engagement," Ju penned in the note.

He notes that Wall Street is looking at Facebook the wrong way, simply looking at the company's monthly active users (MAU), and then multiplying that by average revenue per user (ARPU) to get advertising revenue. Instead, Ju argues that it should be MAU times each product segment to get the true advertising revenue generated by Facebook. He also notes that his estimates do not include any contributions from the pending WhatsApp acquisition, Offers, or the company's mobile ad network, rumored to be launched at the company's F8 developer conference later this year.

"We believe that where we differentiate ourselves from the Street is in the explicit product-byproduct deep dive and projections for not only the existing desktop and mobile products, but also for the upcoming Premium Video ad unit, as well as Graph Search," Ju wrote in the report. "And in this respect, we look to push the analysis for Facebook shares beyond just the gut-feel MAU x ARPU = Revenue equation and have arrived at the conclusion that consensus estimates for the mid-to-longer term are too low."

Separately on Tuesday, WhatsApp announced it had surpassed 500 million users, as the messaging service continues to add users at a break neck speed. "In the last few months, we've grown fastest in countries like Brazil, India, Mexico, and Russia, and our users are also sharing more than 700 million photos and 100 million videos every single day," the company said in the blog post. "We could go on, but for now, it's more important that we get back to work - because here at WhatsApp, we're just getting started."

--Written by Chris Ciaccia in New York

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