Facebook soars 8% on analyst upgradesNovember 26, 2012: 12:44 PM ET
Facebook's (FB) stock is finally starting to live up to the lofty expectations that many investors had for it back in May when the company went public.
Shares of Facebook rose more than 8% Monday after analysts at Bernstein and BTIG upgraded the stock. Facebook has now rallied nearly 50% since touching a low of $17.55 in early September. The stock, currently around $26, is trading at its highest level since late July.
Of course, Facebook has a long way to go before it gets back to its initial offering price of $38.
But some traders on StockTwits are excited about the company's prospects, particularly in mobile advertising.
Facebook did do a good job of silencing some of the skeptics about its mobile strategy following the company's third quarter earnings report last month. And the Instagram deal, criticized by some for its hefty $1 billion price tag, may pay off after all.
Another trader noted that the Facebook surge is even more impressive considering that many experts were predicting a huge plunge once a wave of shares and restricted stock units that were locked up as part of the IPO process were eligible to be sold earlier this month.
Very true. It's a bit surprising that insiders and employees didn't dump shares on the open market once they had the chance. Then again, many of these early Facebook investors may feel that the pummeling the stock took since the IPO was an overreaction. So it may make sense to sit and wait for the stock to rise further instead of selling at what are still depressed prices.
One prominent hedge fund has also been buying Facebook. That may be fueling the rally further.
Investors are clearly following the lead of Tiger Global and its manager Chase Coleman. Tiger also bought shares of beaten-down daily deals site Groupon (GRPN) in the third quarter. The disclosure of those transactions helped push Groupon's stock up more than 30% last week.
But this wouldn't be a story about Facebook if there weren't some nay-sayers.
One trader thinks that the excitement about mobile could prove to be fleeting. Another noted that one research firm that just raised its target price on Facebook has also made a bold call on Apple (AAPL) that isn't looking great these days.
To be fair, mobile advertising is still a relatively young business. But it's true that mobile may be more about hype than reality at this point. Keep in mind that Facebook is still trading at a hefty 40 times 2013 earnings estimates while Google (GOOG), which has arguably done a much better job with mobile already, is trading at only 14 times profit forecasts for next year.
That is correct. Although Facebook at $36 isn't as preposterous as Apple at $1,111. For one, Facebook "only" has to rise another 40% or so to get to $36. And it has traded at that level before.
Apple, on the other hand, would have to nearly double from current levels. And the company would be worth more than $1 trillion if its stock hit Topeka's quadruple 1's target.
Then again, Apple at $1,111 would still be a cheaper stock than Facebook at $36. Facebook's P/E (assuming no change to current earnings estimates) would be 55 at a share price of $36. Apple at $1,111 would be valued at 22.5 times estimates.