Youssef Squali has covered the internet and digital media space as an analyst for two decades. First, he built the team at Jefferies, where he covered the space for eight years, before moving to Cantor Fitzgerald as a managing director in 2008.
He and his team migrated to SunTrust in May, where Squali was charged with building the internet and digital media platform at the bank.
Business Insider spoke to Squali about his team’s initiation of Facebook coverage, including his $US210 price target for the Facebook’s stock price.
Here’s what he had to say about the future of Mark Zuckerberg’s digital empire:
Graham Rapier: What is the most important thing for a new investor to know about the Facebook?
Youssef Squali: Facebook is the most pervasive social platform out there, and as such, it is one of the biggest recipients of digital dollars that are moving very quickly onto the internet.
Rapier: What are some of Facebook’s biggest competitors?
Squali: Competitors with a social platform are relatively smaller. Snap is probably the most interesting of the bunch, and we actually have a sell on it right now. The other big player — and a big recipient of these ad dollars — is Alphabet, in the form of YouTube. As ad dollars move online, they are moving to something similar, and social video is the closest you can get to the TV experience for an advertiser.
Rapier: What’s the biggest driver of growth for Facebook right now?
Squali: It’s three things: user growth, higher engagement, and more advertisers.
More and more people are spending more of their daily waking hours on Facebook. We estimate that across Facebook’s different properties — Facebook.com, WhatsApp, Messenger, and Instagram — users spend on average close to an hour every day. That metric was a lot lower two or three years ago.
By having people spend more time on the sites or apps, they’re obviously consuming more content, more pages, and giving Facebook the ability to monetise against that content and pages.
Rapier: What will Facebook look like in five to 10 years?
Squali: The Facebook platform is likely to still be the primary channel for digital social interaction online, but what actually excites us more is the other assets that Facebook has, like Instagram, which has seen a tremendous amount of user growth and mass adoption by advertisers just because of the ad format. It’s more creative and graphic, so it gives you a better canvas to work with.
Facebook’s other platforms, like Messenger, which today is a mere messaging platform, have potential to become a major e-commerce platform, a la WeChat in China.
One other area that we’re not really giving Facebook any credit for right now, but over time could become material, is Oculus and everything else they’re doing in augmented/virtual reality space, so we’ll see how that progresses.
The point here is that Facebook has multiple potential drivers of growth in the outer years that could make it look quite different, but we think it should be in a stronger position than today.
Rapier: What would you like to ask Mark Zuckerberg if given the opportunity?
I would ask him about WhatsApp, because they spent $US21 billion for that asset and right now we are not giving them any credit for it. If he’s seeing something that we’re not then it would be great for him to share.
WhatsApp is generating close to zero revenues now, they aren’t monetizing it. They have over a billion users, spending literally billions and billions of hours a month on it, but the company has not yet decided to monetise it. Maybe that’s because it’s hard, but management has not provided a tremendous amount of insight.
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