Facebook (FB) is up big in early trading on Wednesday as investors gobble up some of the more than 800 million shares available for insider selling as of today. This is largest tranche of share lock-ups for insiders that will eventually total 1.5 billion shares, nearly 4x the total shares offered in Facebook's IPO last May.
With shares of Facebook still down about 40% from the IPO price many investors are wondering why they should even bother with the stock. In the attached clip Victor Anthony of Topeka Capital Markets ticks off three reasons patient shareholders should start friend-ing FB as the meat of the lock-up ends next month.
1) Monetizing Mobile Ads
The surprise in Facebook's third-quarter earnings report was that the company was able to monetize its growing user base. Making money from ads on a mobile platform was one of the major concerns investors had with the company. Anthony says this headwind has now become a tailwind that will pick up steam in the next few quarters.
2) Big Money Coming In
It's not just individuals waiting for the dust to settle on the end of the lock-ups. Anthony says investors he's talking to are looking to start buying in earnest. The mobile transformation has given this big money confidence that Facebook is here to stay and they want to be part of it.
3) e-Commerce and Search
Anthony thinks business lines that FB hasn't even announced yet are the real hidden opportunity for investors. Facebook is sitting on nearly a billion user base and has yet to figure out how to make money off them beyond selling ads. Anthony has too much respect for Zuckerberg to think he's not going to figure out more ways to profit from users.
Add it up and Anthony's suggested strategy is to give the market time to digest the shares hitting the market then start building long positions. He maintains a 'buy' rating on the stock with a one-year price target of $34.00 a share, giving investors more than 100% of upside if he proves correct.
**Please answer our poll question below: Do you think Facebook (FB) will end this year above or below its IPO price of $38 a share?**
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