Facebook (FB) May Find Low-Tech Answer to Earnings Question, Higher Prices
Tweet
Share
E-mail
Get Alerts FB Hot Sheet
Price: $44.57 +0.27%
Rating Summary:
46 Buy, 17 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 14 | Down: 24 | New: 9
Rating Summary:
46 Buy, 17 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 14 | Down: 24 | New: 9
Join SI Premium – FREE
Analysts at Baird today released a positive report on Facebook (Nasdaq: FB), noting improvements in the social network's ability to leverage opportunities and improve monetization. Monetization has been a key concern among investors, but may ultimately prove to be an important selling point as the company makes progress with a number of key efforts including Exchange and with its controversial News Feed ads.
"Over the past 12 months, Facebook has shifted the source of its revenues from almost exclusively display ads on the right-hand side of the desktop website, to more engaging word of mouth' ads tucked within the Facebook News Feed," said analyst Colin Sebastian.
Almost immediately advertiser began to see improved ad performance, prompting many on Wall Street to take notice and revise estimates higher. But the new strategy is not without risk.
"Given the rapid increase in frequency of News Feed ads, such as Sponsored Stories, Offers and Sponsored Posts, we note there are risks around the user experience, and over-exposure to commercial postings," said Sebastian.
The risk of over-exposure limits Facebooks ability to capitalize on the new strategy. However, the performance of the ads may allow Facebook to increase revenue using an old fashioned but sound business approach, higher prices.
"We believe there is limited opportunity to increase frequency of ads, and growth in revenues will be driven by pricing – a natural result of improving ad performance," concluded the Baird analyst.
Baird has an Outperform rating on Facebook (NASDAQ: FB) with a price target of $34.00.
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 $29.42 yesterday.
"Over the past 12 months, Facebook has shifted the source of its revenues from almost exclusively display ads on the right-hand side of the desktop website, to more engaging word of mouth' ads tucked within the Facebook News Feed," said analyst Colin Sebastian.
Almost immediately advertiser began to see improved ad performance, prompting many on Wall Street to take notice and revise estimates higher. But the new strategy is not without risk.
"Given the rapid increase in frequency of News Feed ads, such as Sponsored Stories, Offers and Sponsored Posts, we note there are risks around the user experience, and over-exposure to commercial postings," said Sebastian.
The risk of over-exposure limits Facebooks ability to capitalize on the new strategy. However, the performance of the ads may allow Facebook to increase revenue using an old fashioned but sound business approach, higher prices.
"We believe there is limited opportunity to increase frequency of ads, and growth in revenues will be driven by pricing – a natural result of improving ad performance," concluded the Baird analyst.
Baird has an Outperform rating on Facebook (NASDAQ: FB) with a price target of $34.00.
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 $29.42 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Investing.com’s stocks of the week
- TFS Financial (TFSL) Tops Q3 EPS by 3c
- Short sellers pile into SpaceX ahead of earnings, lockup expiration
Create E-mail Alert Related Categories
Analyst Comments, Analyst EPS View, General NewsRelated Entities
Robert W Baird, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
