Facebook up 4% after strong mobile and payment revenue

Analysts raise full year projections, but price targets remain the same

Facebook stock is up 4% in trading Thursday, to $28.51 a share, after posting a mixed earnings report Wednesday after the close in which it came in ahead of expectations while earnings on an adjusted basis missed by a penny.

Shares rose .44% in after-hours trading Wednesday, after falling 1.22% in regular trading to $27.43.

Analysts seem reassured in Facebook's long-term potential based on its ad revenue growth. As I noted in my Facebook earnings preview, mobile ad revenue was going to be key to the future of the company.

Advertising revenue was $1.25 billion, or 85% of total revenue for the quarter. It increased 43% from the same quarter last year. Mobile accounted for 30% of that revenue, up from 23% in the fourth quarter of 2012, and up approximately 14% in the third quarter. Facebook has only been counting mobile advertising revenue for the past few quarters, as it has only really begun to make traction in the space in that time.

"This was a quarter that cemented the bull thesis, though not strong enough to shake the bears. We continue to like the progress at Facebook and believe the company is gaining share. Advertising revenue growth (y/y) accelerated from 4Q and the segment had its best showing in more than a year. User metrics were strong,contrary to concerns of a slowdown," Sterne Agee analyst Arvind Bhatia wrote in a note.

Bhatia was also impressed by Facebook's revenue from payments and fees, which took in $213 million during the quarter, higher than the concensus of $191 million.

"This is impressive since payments from Zynga, Facebook’s largest partner in Games,declined 37% y/y in 1Q. Other publishers saw revenue increase 60% y/y in the same period, which more than offset the declines from Zynga," he wrote.

He raised his FY13 Adjusted EBITDA estimate to $3.5 billion from $3.49 billion, and also raised his FY14 Revenue/Adjusted EBITDA estimates to $8.21 billion / $4.68 billion from $8.20billion / $4.67 billion. Bhatia kept his price target for Facebook the same at $37.

JP Morgan analyst Doug Anmuth was was encouraged by the growth in mobile ad revenue, but also expressed some concern over lower than expected revenue from desktop advertising.

"Mobile revenue grew 22% Q/Q, coming in at $374M, well above our $353M projection. However, total Desktop of $872M was lighter than our $921M estimate," he wrote.

"Total Advertising dollars are most important as Facebook again indicated it has considerable discretion over how marketer spend gets allocated across Mobile and Desktop ad placement. This makes the breakdown across Mobile News Feed, Desktop News Feed, and Desktop Right Rail somewhat less meaningful, but we recognize the importance in seeing mobile monetization given the usage shift in the business."

Anmuth raised his projections for full year 2013, from $6.2 billion to $6.4 billion, and 2014, from $7.6 billion to $7.8 billion. His price target for Facebook remains the same at $35.

Facebook posted revenue of $1.46 billion for the quarter, higher than Wall Street's estimates of $1.44 billion, and up 38% from $1.06 billion in the first quarter of 2012. Adjusted earnings per share came in at 12 cents in the quarter, slightly lower than the 13 cents a share that analysts had been expecting, and essentially flat compared to the first quarter of 2012.

While the company's revenue increased by more than 30% year-to-year for the fourth time in a row, having gone up 40% in the last three months of 2012, and up 32% in both the second and third quarter of last year, this is the first time that Facebook's revenue growth has slowed down from quarter to quarter.

Adjusted earnings per share came in at 12 cents in the quarter, slightly lower than the 13 cents a share that analysts had been expecting, and essentially flat compared to the first quarter of 2012.

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