Facebook wows Wall Street with mobile ads growth

Reuters News
Posted: Jul 25, 2013 5:35 AM
Facebook wows Wall Street with mobile ads growth

(Reuters) - Facebook Inc's stellar results allayed fears that the company may face difficulty in making money from mobile ads and prompted several Wall Street brokerages to raise their target price on the stock.

Facebook, whose shares were set to open up 17 percent, posted a jump in second-quarter revenue on Wednesday, with mobile ad revenues making up 41 percent of the total ad revenue.

"Facebook has discovered the formula to begin significantly extracting value from its 1.16 billion global users," said JMP Securities analyst Ronald Josey.

Josey raised his rating on the stock to "market outperform" from "market perform" and said the company was increasingly becoming a "must buy" for advertisers.

At least eight brokerages, including JP Morgan and Morgan Stanley, raised their price targets by as much as $9.

JP Morgan, RBC Capital Markets and Cantor Fitzgerald's new target prices were above Facebook's IPO price of $38, a level the stock has never breached since its first day of trading.

Facebook shares were being quoted at $31.01 in premarket trading on Thursday.

"As mobile becomes the majority of ad revenue in the second half of 2013, we believe the desktop to mobile mix-shift bear argument should fade," JP Morgan analyst Doug Anmuth said.

"Quite simply, mobile moves from a headwind to a tailwind," said Anmuth, who raised his target price on the stock to $44 from $35.

As growing numbers of consumers take to their smartphones to access the Web, internet companies have struggled with the challenge of displaying ads on the smaller screens.

Last week, Google Inc reported second-quarter results short of Wall Street's estimates as weakening prices for its ads weighed on the bottom line.

(Compiled by Saqib Iqbal Ahmed; Editing by Saumyadeb Chakrabarty)