NEW YORK (AP) — Shares of Facebook surged in premarket trading Wednesday, as analysts praised the social media company's third-quarter results, including its first quarter of advertising to mobile device users.
Facebook's net income and revenue surpassed Wall Street expectations, and the company said about 14 percent of its advertising revenue came from ads for mobile users. It started showing those ads about six months ago.
In premarketing trading, Facebook Inc. shares shot up $5.19, or 26.6 percent, to $24.69. The stock hasn't traded that high during the regular session since July.
Citi Investment Research analyst Mark Mahoney said Facebook addressed two major concerns during the quarter: it was able to get money from mobile ads, and it reduced its revenue dependence on slumping Zynga Inc., the maker of "FarmVille," ''Mafia Wars" and other games. Mahoney said Facebook got just 7 percent of its revenue from Zynga during the third quarter. That's down from as much as 12 percent in recent quarters.
Mahoney said Facebook shares have fallen to a reasonable price and the company's revenue growth is speeding up. He upgraded the stock to "Buy" from "Neutral," but trimmed his price target to $30 per share from $35.
"What investors have for the first time since the Facebook IPO is fundamentals acceleration WITH a reasonable valuation," he wrote.
Shares of Facebook closed at $19.50 Tuesday. The stock has lost half its value since its IPO priced at $38.
Jefferies analyst Brian Pitz said Facebook's ad revenue could improve as newer products like Offers and FBX ramp up over time. Pitz kept a "Buy" rating on the shares and raised his price target to $32 from $30.