Facebook upgraded on mobile momentum

Once seen as weakness, mobile business now seen growing strong

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Jan. 28, 2013, 12:27 p.m. EST

 

 

http://www.marketwatch.com/story/facebook-upgraded-on-mobile-momentum-2013-01-28?siteid=bigcharts&dist=bigcharts

 

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By Benjamin Pimentel, MarketWatch

SAN FRANCISCO (MarketWatch) — Once regarded as a weakness, Facebook Inc.’s mobile business is increasingly being viewed as holding the potential to deliver formidable strength for the social media giant.

This much was evident as Raymond James analyst Aaron Kessler raised his rating Monday on Facebook to outperform from market perform, citing “expectation for increasing monetization driven by mobile, new ad formats, and international.” 

Shares of Facebook scheduled to report fourth-quarter financial results after the closing bell on Wednesday, traded up nearly 3% in recent action, after Sterne Agee analyst Arvind Bhatia reaffirmed a buy rating.

Both analysts cited Facebook’s mobile momentum — once referred to as “mobile mojo” by another analyst after the company reported that 14% of its total ad revenues were now derived from its mobile business.

That was a big deal since Facebook FB +2.35%  had been taking heat for not having a clear path to growing its mobile advertising.

That was a factor behind a disappointing initial public offering that turned into a big flop last year. While they’ve recovered of late, Facebook’s shares are still down 15% from its IPO price of $38 a share.

The shares’ recent jump — up nearly 50% in the last three months — is mainly due to rising optimism about its online ad business, particularly its ability to make money out of its growing base of mobile users.

Kessler underscored this in his note to clients, saying he now estimates mobile ads to make up about 26% of Facebook’s total ad revenue. For his part, Bhatia said he expects Facebook’s mobile revenue to grow by more than 75% from the previous quarter.

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Bhatia wrote that Facebook is “well positioned to benefit from two secular trends in advertising — the shift from off-line to on-line advertising and the increasing importance of a social context in on-line advertising.”

Rival Google Inc.’s upbeat results “also bode well for Facebook,” he said. Google GOOG -0.67% last week reported a surge in fourth-quarter profit on strong advertising sales.

Investors will get a better sense of trends in the online ad market when Yahoo Inc. YHOO -0.38%  reports results after Monday’s closing bell. See: Yahoo earnings preview.

Benjamin Pimentel is a MarketWatch reporter based in San Francisco. Follow him on Twitter @MWBenPimentel.