Mobile phone boom signals share bounce for Facebook

FACEBOOK last night benefited from a raft of Wall Street upgrades in the wake of stellar results, pushing its shares up by a further 29.61 per cent.
eMarketer estimates that Facebook could bring in more than $2bn in mobile advertising this year. Picture: PAeMarketer estimates that Facebook could bring in more than $2bn in mobile advertising this year. Picture: PA
eMarketer estimates that Facebook could bring in more than $2bn in mobile advertising this year. Picture: PA

Analysts said the world’s largest social networking company had begun to successfully cash in on its billion-plus global users.

Much of that has been down to the explosion in the use of smartphones and tablets to read messages and update content.

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The firm generated $655.6m (£428.2m) in revenue from mobile advertisements in the three months to 30 June – some 41 per cent of the total $1.6 billion it made from advertising overall, compared with 30 per cent for the same period a year earlier.

The number of mobile users leapt 51 per cent to 819 million.

Research firm eMarketer estimates that Facebook could bring in more than $2bn in mobile advertising this year while raising its share of the overall digital ad market to 5.04 per cent – from 4.11 per cent in 2012.

JMP Securities analyst Ronald Josey said: “Facebook has discovered the formula to begin significantly extracting value from its 1.16 billion global users.”

He raised his rating on the internet giant’s shares to “market outperform” from “market perform” and said the company was increasingly becoming a “must buy” for advertisers.

At least eight brokerages, including JP Morgan and Morgan Stanley, raised their price targets by as much as $9 a share. Cantor Fitzgerald, JP Morgan, RBC Capital Markets’ new target prices were above 
Facebook’s initial public offering price of $38, a level the stock has never breached since its first day of trading. Last night they closed at $34.36, a day after the release of the second-quarter data.

JP Morgan analyst Doug Anmuth said: “As mobile becomes the majority of ad revenue in the second half of 2013, we believe the desktop to mobile mix-shift bear argument should fade.

“Quite simply, mobile moves from a headwind to a tailwind,” added Anmuth, who raised his target price to $44 from $35.

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As growing numbers of consumers take to their smartphones to access the web, internet companies have struggled with the challenge of displaying ads on the smaller screens, and getting users to click through. Last week, Google reported second-quarter results shy of Wall Street’s estimates as weakening prices for its ads weighed on its bottom line.

Facebook founder Mark Zuckerberg, pictutred, said: “The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation.”

He highlighted one of the firm’s most-recent innovations – the introduction of video to Instagram, the photo sharing platform bought for $1bn last year.