Facebook (FB) Goes From Dog To Darling

November 27, 2012 9:56 AM EST
Get Alerts FB Hot Sheet
Price: $127.04 -0.4%

Rating Summary:
    49 Buy, 8 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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It is official. After crumbling in the aftermath of the company's troublesome IPO, Facebook (Nasdaq: FB) stock has finally turned a corner, outperforming the market since the start of Q4. What's more, despite recent gains, some say Facebook stock still looks attractive based on valuation, and importantly, many negatives including worries over lockups and mobile-shift are beginning to fade.

Can it really be? Is Facebook stock really -- gulp -- a buy?


Facebook isn't the only technology company affected by the phenomena known as mobile-shift. Google (Nasdaq: GOOG), Baidu (Nasdaq: BIDU), hundreds of online companies large and small are having to rethink their online advertising strategies as screen sizes shrink. Despite concerns, Facebook might actually be ahead of the game in this area. Its mobile ad revenue grew from $20 million in Q2 of 2012 to $153 million in Q3.

Analysts at Nomura think the gains at Facebook are driven in part by a shift in advertising budgets away from the poorly performing ad sectors on the site. Still, the rapid ramp is encouraging, says the bank.

"Our checks indicate ad dollars have continued accelerating toward mobile, as we now expect FB to generate $315mn of mobile ad rev in 4Q and $1.44bn in 2013. FB's mobile ramp (and daily run-rates) gives us added precision in our 2013 overall modeling, causing us to raise our 2013 ad revenue estimates by 6%. In all, we see mobile driving 63% of Facebook’s 2013E ad growth," said analyst Brian Nowak.

Facebook is also expected to pull in revenue from Facebook Ad Exchange. Nowak thinks revenue in this area could ramp to $450 million next year, or 30 percent of overall revenue.

Obviously desktop ad growth at Facebook is expected to be a laggard, but this is already widely anticipated.

In the end, one of the largest drivers for Facebook's stock may simply be visibility. While the game is early, each quarter gives analysts and investors new insights into the business and allows more precise analysis. The result is confidence, and that more than anything is what has been missing in the stock since the dreadful IPO.

Nomura has a Buy rating on Facebook with an updated price target of $32 (from $27).

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

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