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With lockups done, Facebook stock hits four-month high

Analysts see renewed potential for monetization in mobile and e-commerce

Financial trends and news by Steven Loeb
November 26, 2012 | Comments
Short URL: http://vator.tv/n/2bf7

With major stock lockups behind Facebook, the company's shares hit a four-month high Monday, underscoring hope the company's shares could finally be on stable ground. 

Facebook saw the end of three lockups that spanned four months, the last one seeing the release of 800 million shares. And, despite some hiccups, the stock not only survived, but it thrived. 

The stock reached $26 at one point, its highest since July 26. The stock is currently up 7.82%, trading at $25.88.

What is accounting for this sudden surge?

Well, besides the uncertainty of the lockups no longer being a factor, Barrons points to reports from two analysts, which may have persuaded weary investors to take another look.

First was Bernstein analyst Carlos Kirjner, who upgraded Facebook’s stock to Outperform on Monday. He gave the stock a $33 price target, roughly 32% above current trading levels.

According to Kirjner, investors have been underestimating the company’s ability to beat revenue expectations. He expects Facebook to see $6.98 billion in revenue in 2013, 9% above the consensus of $6.39 billion. He believes that the company will see $8.65 billion in 2014, 7% higher than the consensus $8.08 billion.

The company’s growth will come from its ability to monetize mobile, something that Facebook has made a priority in recent months, and from monetization of the News Feed for PC users. This will then allow the company to find news streams of revenue, including from its newly revamped Gifts feature, and from its advertising partnerships, with companies such as Datalogix. After 2014, though, Kirjner seems less confident in how the company will perform.

After the next two years, he said, Facebook will only continue to grow if it is able to refine its ads, and make them more relevant, so that they don’t distract from the user experience, establish that social ads have more value than regular display advertising and find new revenue streams from an ad network or one of its existing services.

”None of these is easy (far from it!). If Facebook fails to get enough traction in the next 12-18 months in enough of these initiatives, it may not reach (or remain at) our target price, as its long-term growth prospects would dim. That said, with the stock trading at $24, we see much more upside than downside over the next 12 months, given that our conservative assumptions on revenue trajectory imply a revenue beat, and given the upside potential from Facebook’s distinctive assets,” Kirjner wrote.

In addition, Victor Anthony of Topeka Capital also raised his price target Monday, from $34 to $36, citing similar reasons as Kirjner, including the company’s ability to monetize on mobile. He also cited the lockups expirations as a reason to take another look at the stock.

Anthony also mentions the expansion of the Gifts service as a primary way for Facebook to make money.

With some of the uncertainty out of the way, analysts seem to be taking a clearer look at Facebook's future. And at least some like what they see.

(Image source: http://www.bhmpics.com)


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