Facebook's progress in mobile wins it friends on Wall Street

RetailReuters

Facebook Inc's shares were set to open about 25 percent higher on Wednesday after its quarterly results showed a surprising jump in revenue from mobile advertising, easing concerns that the company was having trouble capitalizing on soaring use of smartphones and tablets.

Several brokerages raised their price targets on Facebook shares, which have plunged since the company went public on May 18. Barclays Capital raised its target to $26 from $23, while Jefferies & Co raised its to $32 from $30.

Continue Reading Below

Facebook shares, priced at $38 in their initial public offering, closed at $19.50 on the Nasdaq on Tuesday.

Facebook said on Tuesday it now gets 14 percent of its advertising revenue from mobile ads, a far bigger increase than mostly skeptical analysts had expected.

Over time, Facebook's growing expertise in mobile advertising, combined with more user data, will drive mobile monetization for the company, Colin Sebastian, an analyst at Robert W. Baird & Co, wrote on a note.

Sebastian has a "outperform" rating on the stock and a price target of $32.

Needham & Co analyst Laura Martin said Facebook had opportunities to increase branded advertising revenue as top brands increase their association with the company in some form.

Martin, who has a "buy" rating on the stock and a price target of $25, noted that more than 50 percent of Facebook's monthly active users in September accessed Facebook with mobile devices.

Facebook's advertising revenue increased by 36 percent to $1.09 billion in the third quarter.

Facebook had a painful trading debut in May as investors fretted about its slowing revenue growth and the large pool of additional shares set to hit the market as "lock-up" restrictions on employee share sales expired.

Analysts said the lock-up period expiry remained a near-term concern, but the company' newly proven ability to monetize its overall advertising model could allay those concerns.

(Reporting by Neha Alawadhi in Bangalore; Editing by Ted Kerr)