Facebook shares jump 12 percent as mobile ads win big

Reuters News
Posted: Jan 28, 2016 6:55 AM

By Sayantani Ghosh

(Reuters) - Facebook Inc's <FB.O> shares surged 12 percent in premarket trading on Thursday, after smashing ad sales powered the company's quarterly results and cemented its status as one of the most bankable technology players in the industry.

The jump in shares was set to add nearly $33 billion to Facebook's market value, putting the company on track to re-enter the $300 billion club. The market reaction also presented a sharp contrast to Apple Inc's <AAPL.O> fate on Wednesday.

Facebook's impressive showing bucked the trend of underwhelming results from the iPhone maker and one-time Wall Street darling eBay Inc <EBAY.O>.

"FB has built a remarkable ad platform that enables marketers of all stripes to serve targeted ads to nearly every consumer on the planet," Jefferies analysts wrote in a broker note.

"FB saw nothing that indicated macro weakness, and we think results bode well for other online ad names like Alphabet <GOOGL.O>."

Alphabet is set to report quarterly results on Feb. 1.

Jefferies and at least 12 other brokerages raised their price targets on the company's stock. Piper Jaffray was the most bullish, raising its target to $170 from $155.

The median target on the stock is $140, suggesting that Facebook could add $129 billion in market value over the next 12 months.

Facebook said mobile ads accounted for 80 percent of total ad revenue in the quarter, compared with 69 percent a year earlier. Of the 1.59 billion monthly active users as of Dec. 31, 1.44 billion used the service on mobile devices - a 21 percent jump.

"We believe Facebook is well positioned to increase its share of digital ad spend as well as to help grow the overall category given its reach and effectiveness for advertisers," Goldman Sachs analysts said in a broker note.

They said Facebook's photo-sharing service Instagram, in particular, was poised to become a material contributor to revenue in 2016.

(Reporting by Sayantani Ghosh in Bengaluru; Additional reporting by Tenzin Pema; Editing by Saumyadeb Chakrabarty)