Facebook's (FB) 'Graph Search' Could Be Worth $7-$8/Sh; Google (GOOG) Should Take Note - Topeka

January 15, 2013 4:47 PM EST Send to a Friend
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Topeka Capital's Victor Anthony was one of the first analysts to weigh-in on Facebook's (NASDAQ: FB) new social search engine Graph Search.

In response to today's nearly 3 percent sell-off on the news, Anthony said investor shouldn't be short-sighted. While a monetization component was missing from the presentation the analyst believes it could be "a huge monetization lever for Facebook." Specifically, it could be worth $7-$8 per share for Facebook.

Anthony said the news as a shot-across-the-bow at Google (Nasdaq: GOOG). While not a meaningful competition for Google at this time, they should watch Facebook's action in search closely, given: "(1) any search activity that keeps users away from Google, is quite frankly competition for Google; (2) Facebook has content that is walled off from Google and Google cannot duplicate this content at this time, giving Facebook a clear competitive advantage that it could exploit in the future; (3) Facebook has a cost advantage because the content is supplied by users and it bypasses the brute force cost method at work at Google. That cost advantage could provide pricing leverage in negotiations with advertisers; and (4) Facebook has the ability to market the service to members and advertisers as an integrated index which contains Facebook social content including text, rich media, and links to third party content. This is in large part unavailable to Google."

The firm reiterated their Buy rating and price target of $36 on Facebook, saying buy on the weakness. They called it a must own core holding.

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 $30.95 yesterday.


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