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Facebook stock jumps 19% - best gain since IPO

October 24, 2012: 4:01 PM ET

Click the chart to track shares of Facebook.

Facebook's stock surged more than 19% Wednesday, marking its best one-day gain since the company went public by far, as investors welcomed a healthy boost in sales.

The social media giant delivered third-quarter sales of almost $1.3 billion when it reported earnings after the closing bell Tuesday. That's up 24% from a year earlier.

In particular, investors were impressed by Facebook's ability to earn about $150 million from mobile, accounting for 14% of its total advertising revenue during the quarter, as its mobile customer base rose 61% from last year, to 604 million active users.

During a call with analysts, Facebook CEO Mark Zuckerberg said that concerns about the company's mobile strategy are overblown, adding that "our opportunity on mobile is the most misunderstood aspect of Facebook today."

The fact that mobile ad revenue is becoming more material prompted Citi analysts to upgrade Facebook's stock to a Buy rating, up from Neutral, with a price target of $30 per share.

"What investors have for the first time since the Facebook IPO is fundamentals acceleration WITH a reasonable valuation," wrote Citi analyst Mark Mahaney in a research note.

Related: Two reasons Facebook is turning it around

Facebook's stock rally comes a day before many of the company's employees will be able to sell their shares of the company. Facebook's main form of equity compensation, restricted stock units, will convert into common stock shares on Thursday using Wednesday's closing price. Facebook's current and former employees hold about 225 million of those units, worth nearly $5 billion based on Facebook's current share price. But they won't be eligible to sell those shares until Monday.

While the looming lockup expiration could put pressure on Facebook's stock, Mahaney said he that "long-term investors can use weakness around said lockups" and benefit from the positive fundamentals and valuation.

Despite Wednesday's big advance, Facebook (FB) shares are still about 40% below their IPO price of $38.

As Facebook's stock rallied, other social media stocks also enjoyed a bump Wednesday. Shares of Yelp (YELP) jumped 7%, while LinkedIn (LNKD) gained 3%. Shares of the Social Media ETF (SOCL) rose more than 2%.

Zynga's stock declined 3%, as the company gears up to open its books after the closing bell. Zynga (ZNGA) makes money from games like Farmville and Mafia Wars, but has been struggling as users on Facebook, its biggest platform, cut back on their purchases.

Facebook's latest earnings report showed a 20% decline in payment revenue from Zynga over the last year. Late Tuesday, Zynga laid off 5% of its staff from multiple offices.

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Stupid Stock Move of the Day
#StupidStock Move of the Day! $LYG & $RBS up around 2%? Yes. They've both been hit hard lately. But still some uncertainty here. #scotland
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