Facebook Enters Sophomore Stock Year with Fewer Skeptics
NEW YORK (TheStreet) -- The obsession of a generation of college freshman, Facebook (FB) enters its sophomore year as a public company with a rare pessimist converting into an optimist on the social network's stock.
On Monday BMO Capital Markets analyst Daniel Salmon upgraded Facebook to "Outperform" from a previous rating of "Underperform" - the Wall Street equivalent of sell - on expectations the company will see an acceleration of ad revenue and continued growth in its newfound focus on mobile ad dollars as users increasingly access the social network on Apple (AAPL) , Microsoft (MSFT) and Google (GOOG) -powered smartphone devices.
Notably, Salmon is increasing Facebook's 2013 earnings expectations by just 20%, but sees a more than doubling of Facebook's shares from previous forecasts on a surge in the company's valuation multiples.
"We believe Facebook is experiencing a reacceleration of ad spending from large brands that are returning for mobile "reach & frequency" and more video ads," writes Salmon, in the Monday upgrade, which more than doubles Facebook's price target to $32 a share from a previous estimate of $15.
"We also believe direct response (DR) advertisers are now armed with a proper set of ad buying tools; while Facebook Exchange receives most of the attention, Custom Audiences is what we hear the best feedback about," adds Salmon.
After reporting better than expected earnings in October that signaled progress on Facebook's efforts to generate mobile ad revenue -- a key uncertainty in the wake of the network's May 18 initial public offering -- it appears chief executive Mark Zuckerberg & Co. are increasingly winning over skeptics on the company's long-term earnings potential.
Previous to Salmon of BMO's Monday upgrade, only three of the 40 analyst covering Facebook held out a 'Sell' rating for the company's shares, according to analyst estimates compiled by Bloomberg.