Facebook Share Price: Mobile-Ad Growth Propels Social Network Giant

on Jul 25, 2013
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iNVEZZ.com, Thursday, July 25: Facebook Inc (NASDAQ:FB), the operator of the world’s largest social network, gave investors plenty of reason to celebrate on Wednesday, posting a much better-than-expected jump in mobile-ad revenue in the second quarter. Reflecting the growing appeal of the social networking platform to advertisers, ad prices increased 13 percent in the period. In contrast, rivals Google Inc (NASDAQ:GOOG) and Yahoo Inc (NASDAQ:YHOO) both reported declines in ad prices earlier this month.

The upbeat results spurred a rally in the Facebook share price, which rose as much as 21 percent in after hours trade in New York on Wednesday. In today’s pre-market, the stock was trading 17.69 percent up at $31.20 as of 11:31 BST.
**Great quarter**
Facebook’s second quarter revenue increased 53 percent to $1.81 billion from a year earlier, the company said yesterday in a statement. That was above the average projection of $1.62 billion by analysts surveyed by Bloomberg. Revenue from advertising, which accounted for 88 percent of total revenue, rose 61 percent to $1.6 billion year-on-year. Forty-one percent of the advertising revenue came from mobile ads, the company said, an increase on the same quarter last year, when mobile ads accounted for 30 percent of revenue generated through advertising.

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“There’s latent demand for marketers to spend money on Facebook,” Jordan Rohan, an analyst at Stifel Nicolaus & Co, said in an interview, as quoted by Bloomberg. “The company finally introduced the right set of ad products to facilitate that.” Rohan rates Facebook shares a buy.
Non-GAAP earnings rose to 19 cents per share (from 12 a year earlier), beating the average analysts’ estimate of 14 cents per share.

The company also saw a significant increase in daily users and mobile users in the quarter. It said that daily active users on the platform were 699 million on average for June 2013, a 27 percent increase year-on-year. The number of mobile monthly active users (MAUs) expanded 51 percent to 819 million. Total MAUs stood at 1.15 billion from 1.11 billion a year earlier.

“Finally, the blowout quarter that Facebook bulls have been waiting for,” said Paul Sweeney, an analyst at Bloomberg Industries, who also highlighted the percentage of revenue generated through mobile advertising, “which was well above consensus.”
Facebook is projected to take 13 percent of the global mobile-advertising market this year, more than double last year’s 5.4 percent, according to EMarketer Inc. The company, however, remains a distant second in that market, behind Google which is forecast to grab 56 percent market share.

**Stock upgrade**
!m[Company Becoming a “Must Buy” for Advertisers](/uploads/story/4332/thumbs/pic1_inline.png)
The upbeat results prompted a number of brokerages to raise their target price on Facebook’s shares. At least eight brokerages including JP Morgan and Morgan Stanley, raised their price targets by as much as $9, according to Reuters.
“Facebook has discovered the formula to begin significantly extracting value from its 1.16 billion global users,” said JMP Securities analyst Ronald Josey, as quoted by Reuters. He raised his rating on the shares to “market outperform” from “market perform” and said the company was increasingly becoming a “must buy” for advertisers.
**The Facebook share price (pre-market) was $32.70 as of 12.41 BST, 25.07.2013**

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