Facebook shares rallied an impressive 30% Thursday, allowing the stock to book its best one-day gain ever. And while shares remain about 10% below the May 2012 IPO price of $38, analysts are predicting that Facebook is finally on its way to reaching, and even crossing, that threshold.
"Facebook delivered its strongest quarter yet as a public company -- results that we think could be thesis-changing for many," said Doug Anmuth, a JPMorgan analyst who boosted his price target to $44 a share from $35.
Investors and analysts are most impressed by Facebook's growing strength in mobile advertising -- a part of the business they were initially most concerned about since Facebook lacked a clear strategy for mobile advertising despite the rapidly growing number of people using Facebook on their mobile phones and tablets.
"One year into Facebook's mobile advertising efforts, mobile has increased from zero to 41% of total ad revenue," Anmuth highlighted in a note to clients.
While the improvements have been gradual, Facebook blew everyone away this past quarter by generating 50% more in mobile ad revenue than what Wall Street was expecting.
Even after that stellar quarter, analysts say growth should remain strong as Facebook continues to shift toward more social ads that will become increasingly valuable to advertisers.
Analysts at JMP Securities, who increased their share price target to $38, said that social media giant's second-quarter results suggest that "Facebook is increasingly becoming a 'must buy' for advertisers."
Goldman Sachs analysts were also excited by Facebook's significant improvement in mobile advertising. They put a bullish price target of $46 on Facebook shares.
"We continue to believe Facebook is at the center of the mobile ad revolution and see considerable opportunity for it to drive higher pricing on its ad units as brand and direct marketers alike take advantage of its broad reach and precise targeting," said Goldman analyst Heather Bellini.
As Facebook (FB) shares surged, a number of investors were getting in on the action. Over 360 million shares of Facebook had exchanged hands Thursday, more than seven times the stock's average daily trading volume.
The day's surge pushed the value of Facebook to more than $80 billion, up from just over $60 billion as of Wednesday's closing bell.
Facebook's advance was also getting plenty of attention on Twitter.
Don't want to jinx it, but I'm about to break even on my IPO day $FB investment! I'm still LONG—
Ross Sheingold (@RossSheingold) July 25, 2013
$FB hasn't even started off-site ads yet. $FB creates the most relevant ads. Advertiser's will pay a premium. $FB continued rev growth.—
Fibo Waves (@Fibowaves618) July 25, 2013
Mobile advertising makes up 41% of all revenue at Facebook now. Remember the pundits who swore $FB wouldn't be able to monetize mobile?—
Joe McCann (@joemccann) July 25, 2013
Despite the solid results and big run-up, however, some in the Twitterverse remained skeptical of Facebook's future.
$FB what a hole that will one day implode. Stupid money, but congrats to those riding the wave.—
(@TraderJive) July 25, 2013
Monster rally in $FB Facebook. I'm not involved but still a doubter, don't like long term revenue prospects—
Steve Cortes (@CortesSteve) July 25, 2013
$FB up 24%. Still not sure if I will ever be in the green with that buy.—
Matthew Kammerer (@mkammerer) July 25, 2013
Still, plenty seemed to regret not having bought Facebook shares sooner.
Almost choked when I saw $FB soar this morning. I wanted in so bad at $19. Missed it.—
(@MarkinCHS) July 25, 2013
Wish I bought $FB right about now—
Kyle Russell (@KRussell142) July 25, 2013
Other social media stocks were also higher on the back of Facbeook's strong quarter. Chinese Internet social media platform YY (YY) jumped more than 11%, while Zynga (ZNGA) shares jumped 6%. LinkedIn (LNKD) and Yelp (YELP) shares rose more than 3%.
Despite a stubbornly slow economic recovery at home and severe headwinds from Europe and Asia, U.S. companies are on track to deliver a tenth straight quarter of rising profits. But a closer look reveals some alarming trends.
With reports from more than 80% of the S&P 500 companies on the books, earnings are on pace to grow just 0.6% during the second quarter, the slowest since the third quarter of MOREHibah Yousuf - Aug 7, 2012 8:10 AM ET
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