Facebook Inc. (NASDAQ:FB): Can Shares Continue To Move Higher For Investors?
Diane Alter: Facebook Inc. (NASDAQ:FB) stock finally has been acting like it was expected to after its hugely hyped initial public offering in May: It’s rising.
In a stark about-face, the stock has advanced more than 24% in November, after falling 50% from its IPO price over the previous five months.
The FB rally was pronounced Monday, with shares of the social networking giant closing up 8.09%.
In addition, it has logged better returns than the S&P 500 by 24 percentage points over the last 60 trading sessions.
What sparked the rise was an upgrade from Bernstein Research’s Carlos Kirjner, who has been one the biggest bears of the bunch covering Facebook. Kirjner said most analysts are presently underestimating the world’s largest social network’s potential.
Kirjner upped FB stock to “Outperform” from “Market Perform,” and hiked its price target to $33 from $24. He maintains Facebook’s revenue will increase over the next year or two from its new mobile advertisements and new e-commerce businesses such as Facebook Gifts and its promote-to-post program.
What’s Making Facebook Stock More Appealing
In a race to capitalize on its massive member count, Facebook is working fervently with scores of retailers.
Facebook debuted a new tool on Black Friday which allows online retailers to track the purchases of Facebook members who have viewed their ads.
Plus, FB just began offering Apple Inc.’s (NASDAQ:AAPL) iTunes credits in their “Gifts” section, which allows users to purchase iTunes credits for their friends though Facebook.
With more and more Facebook users accessing the site solely on mobile devices like smartphones and tablets, gaining traction in the mobile arena is paramount for the social networking behemoth.
The company reported last month that its push to become a more integrated mobile player is paying off. About 15% of its ad revenue in the most recent quarter, some $150 million, came from mobile.
A still cautious Kirjner noted that Facebook’s foray into mobile, and the revenue generated so far, is proof FB can monetize its 1 billion users. He now estimates the company will reap $6.9 billion in revenue next year, citing new ad projections, up 40% from the $4.99 billion previously estimated by a bevy of analysts surveyed by Thomson Reuters.
BTIG Research’s Richard Greenfield, another Facebook skeptic, also goosed shares Monday with an upgrade to “neutral,” citing the fresh revenue stream expected from Facebook’s mobile moves.
Greenfield forecasts Facebook revenue to spike 37% higher in the current quarter to $1.55 billion, compared to the same period a year ago.
Facebook Stock Risks Remain
While some analysts have favored the stock lately, there are still concerns weighing on the company’s potential.
Facebook’s stock price remains under pressure as a deluge of shares freed up from the expiration of IPO lockups continues to flood the market.
Insiders are still cashing in, and while newly launched programs look promising, it’s way too early to tell if they will actually pay off.
“Facebook remains a risky investment. If Facebook fails to get enough traction in the next 12-18 months, its long-term growth prospects would dim,” Kirjner cautions.
Greenfield also remains uncertain long-term, warning that Facebook’s push to sell more mobile ads could turn users off by the blitz.
In a note to investors, Greenfield wrote, “We believe Facebook is making a serious user experience mistake that will be problematic longer term.”
Near-term scenarios also look pessimistic.
Schaffer’s Investment Research reported that the FB put/call open interest ratio reveals that among options expiring within the next three months, bearish puts outnumber bullish calls.
So despite the recent upgrades, Facebook stock bears have not yet gone into hibernation.
Related ETF: Global X Funds (NASDAQ:SOCL).
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