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Facebook a Stock to Watch This Week

Shares of Facebook were up 4 percent this past week–particularly impressive in a market that saw its largest weekly drop since April.

Shares rallied after it announced that it was adding a new video feature to Instagram, the popular social platform that allows users to post pictures. The new video feature allows people to post short, 15 second videos in what is a direct assault on Twitter’s Vine.

Most investors and analysts are positive on the news. Sterne Agee analyst, Arvind Bhatia, said that he thinks this is the first step towards the monetization of Instagram.

A UBS analyst said, “Based on our checks, Facebook plans to begin selling Newsfeed video ads in 2H 2013. Our estimates assume that Facebook will be able to monetize daily video ad slots in the seven-figure range,”

Although short videos are nothing new, Vine has brought the format to mainstream acceptance. Whether Facebook can take large-scale marketshare will be known in the coming years but in its early stages, it seems to be catching on. Lululemon, (NYSE: LULU) as well as Urban Outfitters (NYSE: URBN) have already posted videos.

A Bank of America analyst said, “Video on Instagram should help drive activity although we continue to have limited visibility on monetization (display or video), and do not see Facebook monetizing videos on Instagram in the next 12-months”

Disclosure: At the time of this writing, the author had no position in the companies mentioned.

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