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Remember when Facebook had a disastrous IPO and its stock fell to $18/share because the company couldn’t figure out how to re-accelerate its revenues and it seemed lost in mobile?That seems like so long ago.
Today, Facebook stock is up more than 4% – above $27.
One reason is that, starting in mid-December, Wall Street analysts began heaping praise on the company and raising their price targets.
Topeka Capital’s Ken Sena ($32) raised his on December 17, and today Morgan Stanley’s Scott Devitt ($32) and JP Morgan’s Doug Anmuth ($35) followed suit.
Here’s what has all three so bullish about Facebook:
Mobile has gone from being perceived as challenge to Facebook to now being seen as a huge opportunity. Analysts hear that ads in Facebook’s mobile Newsfeed are working. Devitt says mobile revenues will make up 20% of Facebook’s overall top line in Q4, up from 3% in Q2. Sena is even more optimistic, putting the figure at 24%. Anmuth says mobile will generate $2.13 billion for Facebook in 2013, up from his previous $2 billion estimate. He says mobile revenues will surpass desktop in 2014.
Ads in the Newsfeed are much more effective than ads on the right side, where Facebook used to put them. Anmuth says Newsfeed ads and mobile ads will make up 60% of Facebook’s revenues in Q4. According to Sevitt, Samsung Mobile attributes ~$129 million in sales to a $10 million spend on Facebook ads for an impressive 13X ROI.
Facebook users are actually buying Facebook Gifts for each other, and the business will soon generate meaningful revenues. Devitt says Gifts will contribute $1 billion+ by 2015. Sena says Gifts could make up 5% of Facebook’s profits in 2013.
Advertisers love Facebook’s ad exchange, which has tons of room to grow. All three said Facebook’s ad exchange, which allows advertisers to use third-party data to target ads on Facebook.com, is a much beloved product that still has tons of “headroom” because Facebook hasn’t turned over more than 10% of its inventory to it yet.
If only someone had seen these opportunities for Facebook to re-accelerate its revenues back when the stock was around $19…