Facebook needs an 'encore' beyond advertising to make Gene Munster believe in the stock

• Gene Munster complimented Facebook's first-quarter earnings, but argued the company must become less reliant on advertising revenue for him to be a believer in the stock. 
• "I just think that the central question for long-term investors should be, 'What is their encore?' Messenger is probably not that," the Loup Ventures managing partner told CNBC.
• Munster said virtual reality and augmented reality is one area in which Facebook could become "transformative."

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Loup Ventures' Gene Munster complimented Facebook's first-quarter earnings Wednesday, but argued the social media giant must become less reliant on advertising revenue for him to be optimistic on the stock. 

"I just think that the central question for long-term investors should be, 'What is their encore?' Messenger is probably not that," Munster said on CNBC's "Fast Money." "I'm still neutral," he added. 

Shares of Facebook were surging in extended trading Wednesday, rising more than 10% at one point. 

The company reported a nearly 18% increase in quarterly revenue compared to the same period last year, and said its ad revenue was beginning to stabilize in April after coronavirus-related declines in March. 

Of Facebook's $17.74 billion in revenue in the quarter, the vast majority — $17.44 billion — came from advertising. 

The company reported $297 million in "Other" revenue, a year-over-year increase of 80%. Growth in that segment was driven primarily by sales of Oculus virtual reality headsets, according to Facebook CFO David Wehner. Sales of the Portal TV video chat system, which in March was sold out in various places, are also included in "Other" revenue. 

Munster, a former top Wall Street tech analyst turned venture capitalist, said he believes virtual reality and augmented reality is one area in which Facebook could become "transformative and advance how humanity interacts."

"That to me is the big lever," he said. "That is something that, as they progress, I could get more optimistic about the story." 

Facebook's market cap is nearing $600 billion, Munster noted. But he argued that, "you have to change the world beyond what is going on in advertising" to approach the $1 trillion territory like other tech titans such as Apple. 

Munster said Messenger and WhatsApp will "undoubtedly" help Facebook grow revenue. "This is a solid business. Hats off to them in the near term," he said. 

"But I do see the language around investors and how they view this story longer term shifting to other ways that they ultimately grow beyond just advertising." 

- CNBC's Salvador Rodriguez contributed to this report.