Breakout

Facebook Thriving as Ad Money Goes Mobile

Jeff Macke
Breakout

Shares of Facebook (FB) are under pressure today after climbing over 3% on Friday when Cowen & Co. upgraded the stock from "market perform" to "outperform"and raised its price target from $29 to $53 per share. Analysts cited optimism that FB's revenue momentum would prove sustainable. FB closed at an all-time high of $47.49, more than 90% higher than where they were three months ago.

With the stock well above its disastrous IPO level of $38 and CEO Mark Zuckerberg transforming from "hoodie boy" to an esteemed business leader discussing immigration policy in Washington DC, it's fair to say Facebook has grown out of its awkward phase and entered corporate adulthood. That's great news for early investors but almost necessarily means growth is going to slow.

Todd Schoenberger of LandColt Capital says Facebook's best days are still in front of it. In the attached video Schoenberger explains that Facebook hasn't even scratched the surface of the mobile advertising possibilities.

"People are watching Yahoo Finance on their iPads on their iPhones then looking at their Facebook. There's going to be a way to cross-market ad revenue. It's all about multimedia," Schoenberger howls. "The days of sitting on the couch watching TV are no longer there."

Even the television industry is starting to concede the era of couch potatoes is over. This week Nielsen will formally announce plans to begin measuring viewership on mobile devices and smartphones when creating its industry-standard ratings. It's another affirmation that Facebook's ability to generate more than 41% of its advertising revenue from mobile last quarter wasn't just a flash in the pan.No one is asking whether or not Facebook is going to be able to find revenue growth anymore. The only debate is over how fast and how much of the enormous potential ad money pie on mobile platforms will go to Facebook.

Like other social media company stocks that have suddenly started ripping in 2013, Facebook's business prospects and share price are only loosely related. It would take a Herculean effort for Facebook to grow revenue fast enough to be "cheap" anytime soon on a fundamental basis, but for desperate fund managers it might look like a steal as the rally of 2013 leaves their returns in the dust.

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