Buy Facebook (FB) Now or Miss the Next "Killer App" that will Monetize 1B People

December 24, 2012 9:08 AM EST
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Price: $128.69 -0.19%

Rating Summary:
    49 Buy, 8 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 18 | Down: 17 | New: 10
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Needham & Company raised estimates and its price target on Buy-rated Facebook (NASDAQ: FB) Monday, citing strong mobile revenue growth and its scarcity value.

The firm raised its price target from $25 to $33, raised 2013 revenue estimate to $6.5B (from $6.27B), and 2013 EPS estimate to $0.65 (from $0.59).

Needham & Company analyst Laura Martin said the company's mobile monetization effort will exhibit strong growth in 4Q12 and will exceed current Wall Street estimates in FY13. "3Q12 mobile revenue was approximately $150mm and we expect 4Q12 mobile revenue to be approximately $250mm," the analyst said. "This is up from zero in March of 2012."

While it is unclear if Facebook has found that "killer app" that would monetize its 1 billion global users, Martin is confident that each time Facebook discovers a successful new monetization format it can roll it out globally almost immediately and at a ow incremental cost. "It will be hard to catch this stock on the way up," the analyst explains. "In our view, buying it now would enable investors to participate in the potentially significant incremental returns on capital of this "closed-system" global platform."

With customers spending more time on Facebook (17%) versus any other site, Facebook "represents the most valuable property on the Internet today," the analyst said. "We believe there are several new revenue streams that could buttress FB's growth in 2013. For example, putting videos (with ads) on FB's platform or adding more commerce options (like "buy now" and "gifts") as well as several other new revenue streams introduced in 2012 that could create upside to consensus estimates in FY13."

For an analyst ratings summary and ratings history on Facebook click here. For more ratings news on Facebook click here.

Shares of Facebook closed at $26.26 yesterday.

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