Money Morning Director of Technology & Venture Capital Research Michael A. Robinson already has a bullish Facebook stock price prediction, and we just received 1.3 billion more reasons to like Facebook Inc. (Nasdaq: FB) stock.
We’re going to get to his bold FB stock price prediction, which shows double-digit gains in the next three years, in just a bit.
But the story to focus on right now is Facebook’s Messenger service reaching 1.3 billion users…
Why Facebook Messenger Can Help the Facebook Stock Price Climb
At first, it was an annoyance. Why should you have to download two Facebook apps instead of just one?
However, users are embracing it.
Facebook Messenger now has 1.3 billion monthly users, up from 1 billion in July 2016.
And this is all part of Facebook CEO Mark Zuckerberg’s master plan to increase revenue, helping the FB stock price reach Robinson’s bold price prediction even faster.
According to a Sept. 17 Yahoo Finance report, over 70 million businesses are using Facebook Messenger. For example, flight provider Icelandair allows travelers to search and book flights through its Messenger Bot.
In May 2017, the Venetian hotel in Las Vegas was the first hotel in Sin City to offer bookings through Messenger.
But Zuckerberg’s plan is even more ambitious…
Along with Messenger users being able to connect with businesses, Zuckerberg launched “Messenger Day” within Messenger in March 2017. It’s similar to Snap Inc. (NYSE: SNAP), as users can share pictures and videos that disappear after 24 hours. Messenger Day already has 70 million users, and it just launched in March, while Snapchat had 166 million daily active users as of Q1 2017 and has been around since 2011.
And now that the Messenger app’s user base is expanding, Zuckerberg will begin to sell ad space to monetize it.
According to a March 9 TechCrunch report, Facebook’s Head of Messaging David Marcus said Facebook would “probably” insert advertisements between posts in Messenger Day.
There aren’t any projections on how much revenue this would add to Facebook yet. But, we do know Deutsche Bank AG (USA) (NYSE: DB) projects Messenger and Facebook’s other messaging service, WhatsApp, could generate a combined $10 billion annually for Facebook by 2020.
That would roughly be an additional $2.5 billion per quarter over Facebook’s current $9.32 billion in revenue from Q2 2017.
You see, these 1.3 billion users are a gold mine for Zuckerberg. But there are two other reasons the Facebook stock price will climb double digits in the next three years…
Why the Facebook Stock Price Will Reach $250 by 2020
First, Instagram, the picture app acquired by Facebook in 2012, will see its revenue skyrocket.
In 2016, Facebook generated between $650 million and $750 million in revenue from Instagram. In 2021, research site Statista projects Instagram will generate $9.5 billion in revenue. That’s potentially more than 1,000% growth in revenue.
Second, Facebook will also generate billions in revenue from its virtual reality (VR) company, Oculus VR.
Zuckerberg paid $2 billion for Oculus VR in 2014, but it will soon pay for itself. By 2020, research company Tractica believes $21.8 billion will be generated from sales of VR head-mounted displays, VR content, and VR accessories.
The Facebook stock price has vastly outperformed the Dow in 2017, climbing 48.84%. In comparison, the Dow is up just 13.10%.
And we expect these marketing-beating gains to continue…
“There is no question in my mind at this point that Facebook will hit $250. The only question is when, and 2020 strikes me as a solid forecast at this point,” Robinson told me.
From today’s opening price of $170.62, that’s a potential profit of 46.52%. And while that’s Robinson’s prediction for 2020, that doesn’t mean the Facebook stock price would stop climbing after it hits $250.
If there are two things Zuckerberg knows, they’re how to scale a business, and how to make shareholders a ton of money along the way.
— Jack Delaney
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Source: Money Morning