3 Reasons Facebook Stock Will Rise in 2016

As of Dec. 9, Facebook stock was up a whopping 34% year to date, and it continues to flirt with its 52-week high of around $110 a share. Which begs the question as we near year's end: What does Facebook do for an encore in 2016? Barring any unforeseen, widespread negative economic circumstances, the answer will be another stellar year for Facebook shareholders.

Why the bullish sentiment given Facebook's meteoric rise in stock price in 2015? There's the untapped potential of Facebook's 900 million (and counting) WhatsApp monthly average users (MAUs), and the 700 million regular users of its Messenger app that have yet to generate revenue. Those potential goldmines appear to be on Facebook's back-burner, but WhatsApp and Messenger are hardly the only avenues of growth.

Three cheers for the small guySome industry pundits, and even COO Sheryl Sandberg, have questioned whether Facebook has what it takes to reel in the big brand-name advertisers. Facebook certainly isn't devoid of national advertisers, but it recognizes the big marketing boys isn't where its bread is buttered.

The vast majority of Facebook's 2.5 million advertising partners are of the small to mid-sized business (SMB) variety. As last quarter's record $4.5 billion in revenue indicates -- $4.3 billion of which came from ads -- Facebook's focus on SMBs is paying off handsomely, and it's just scratching the surface. In April of this year, Facebook had 40 million businesses with their own Pages on the site: that's a lot of untapped advertising potential. Today, that number has grown to over 50 million. In other words, tens of millions of potential advertising partners are already in-house.

The coming of videoThe frequency of online video views has grown dramatically in the past year, and based on most forecasts, that number will continue to rise. In fact, the time users spend on Alphabet's YouTube property, Facebook, and other online video alternatives is expected to increase over 23% this year, and nearly 20% again next year.

Like Alphabet, Facebook doesn't break out video advertising revenue specifics, but the number of "shares" have increased over 40% the past year. Now, with monetization efforts in full swing, 2016 could prove to be the year of the video spot. Facebook fans may recall it was able to charge $1 million a day for the "privilege" of partaking in the early video ad testing phase; clearly, the potential is enormous. Even then, Facebook has some work to do in catching YouTube.

One analyst suggests that YouTube alone is worth about $70 billion -- and growing. That's a big mountain to climb, but Facebook has an ace up its sleeve.

As if the upside of selling video spots on Facebook's site isn't enough to excite investors, its wildly popular Instagram photo-sharing site should. Instagram's very existence and rapid MAU growth is predicated on images, which makes video simply an extension of the site's primary function. With 400 million MAUs and Facebook's recent decision to fully monetize the site, Instagram will go a long way toward Facebook reaching, if not exceeding, its video ambitions.

The reality of VRMore than a couple of eyebrows were raised when Facebook announced the deal to acquire virtual reality (VR) headset manufacturer Oculus for a cool $2 billion in early 2014. After all, hardware isn't exactly Facebook's bailiwick. Turns out, CEO Mark Zuckerberg was onto something. The VR market is expected to generate upwards of $30 billion in just a few short years, and the Oculus Rift headset is widely regarded as top of its class.

Zuckerberg confirmed last quarter that Rift would be made available to the masses early in 2016, providing Facebook with yet another avenue of growth. In addition to the revenue derived from direct sales of the Rift VR headset, recent deals with game console makers like Microsoftopen up a whole new set of revenue possibilities for Facebook -- and it begins next year.

The article 3 Reasons Facebook Stock Will Rise in 2016 originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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