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Facebook above $30 for the first time since July

Mysterious product launch is fanning interest, but stock has been rising since November

Financial trends and news by Steven Loeb
January 9, 2013 | Comments
Short URL: http://vator.tv/n/2ccd

If you've been following Facebook's stock at all the last few months, you know that, after a rollercoaster ride throughout the year, things have kind of steadied for the social network in the last few months. Not only has the stock stayed above $20 since November 15, in fact, it has even begun to slowly rise. rise. Something happened Wednesday, though, that the stock had no experienced since July.

Facebook's stock went over $30 for the first time since July 16, when it hit a high of $30.5. The last time the stock closed above that range was July 13, when it closed at $30.72 a share.

The stock hit a high of $30.56 today, and is ended trading at $30.59 a share, up 5.26%. It is currently up another .16% in after hours trading.

So what is behind this sudden surge?

Many are pointing toward a mysterious invitation that was sent to various media outlets, which simply said, ""Come and see what we're building," and invited them to come to Facebook headquarters on January 15 at 10 a.m. Pacific Time. 

Could the mere speculation about a potential product that nobody knows anything about have driven so much interest in Facebook? Perhaps, but only in the short term. If you look at how the stock has performed in the long term, mainly since November, there are other factors that have contributed to the rise in the stock price.

The end of lockups

The last day that Facebook ended trading below $20 was November 13. The next day, Facebook saw its biggest lockout end, with 800 million shares of employee stock becoming available for trading.

Despite the flood shares entering the market, the stock actually shot up, ending up over 11% on the day at $22.36 a share.

It was the third lockout, and by the biggest one that Facebook was going to have to weather. Over 271 million shares had been freed to be sold by executives and investors in August and, as a result, the stock fell nearly 5% to $20.17, its lowest levels yet at the time, down to nearly 50% of its IPO price. Then, at the end of October, 230 million shares held by employees and executives were freed and the stock dropped 3.79% to $21.11. 

After the 800 share were released, the stock hit a four-month high.

Sure, Facebook had still had two lockup left to go: one on December 14, which caused the stock to fall 5% when 149 million shares will be available to be traded. And one that will take place on May 18, 2013, 47 million shares will be allowed to be traded. But the biggest flood shares were already behind it and, as a result, analysts even began to upgrade their price targets for the social network.

Analyst upgrades

A major factor in the rebounding of the stock, were reports analysts in November and December who upgraded their outlook on Facebook.

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 in November, giving the stock a $33 price target, roughly 32% above current trading levels.

Kirjner said that investors were underestimating the company’s ability to beat revenue expectations, and that he expected 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.

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.

Victor Anthony of Topeka Capital also raised his price target, 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 mentioned the expansion of the Gifts service as a primary way for Facebook to make money.

On December 31, BMO Capital analyst Daniel Salmon also upgraded Facebook from Underperform to Outperform and raised its price target from $15 to $32.

Part of the reason he gave was Facebook's successful foray into mobile advertising.

Facebook is "experiencing a reacceleration of ad spending from large brands that are returning for mobile "reach & frequency" and more video ads," he is quoted as saying.

 Obviously, the release of a new product will get people buzzing about the company again, but there are other, more encouraging signs that this could be a more stable return.

Facebook could not be reached for comment.

(Image source: http://german.fansshare.com)


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