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article imageFacebook share price surge leaves analysts breathless

By Nicole Weddington     Mar 13, 2014 in Business
Analysts on Wall Street got a run for their money when Facebook stock catapulted to new heights, closing at $72.03 on Tuesday, leaving them in a state of wonder.
The price of Facebook ballooned by 32 percent in just the past three months, casting a big shadow over the meek 1.6 percent gain in the Standard & Poor’s 500 Index.
This explosive climb in value has analysts who follow Facebook scratching their heads. Predictions made by 38 of the 49 Facebook analysts pegged it with a buy rating. While 16 of the total group now find themselves scrambling to amend their targets, according to data compiled by Bloomberg as of Tuesday’s close of market.
The average 12-month price target as predicted by Facebook analysts is $72.46, just shy of one percent over Tuesday’s closing price. Such a phenomenal and unexplainable upsurge in value that outweighs evaluations indicates that most analysts see minimal promise in the stock.
Richard Greenfield, an analyst at BTIG in New York, states, “Facebook stock has just ripped past expectations.” Greenfield’s own recommendation from last October pegged the stock price at a target of $68 over the next twelve months. Facebook was trading close $49 at that time.
This surge in stock prices eclipses Facebook’s initial fall upon public offering, as it plummeted by 50 percent within a few months of its May 2013 debut. The main impetus behind this was uncertainty shared by investors as to how Facebook would play out in the mobile market, which was weak at that time.
There are plenty of Facebook likes to go around.
Facebook faced that challenge head-on with a move to enable friendlier connectivity on smartphones tablets, subsidized with strategic mobile marketing. As of January quarterly results outpaced estimates, with over half of Facebook’s ad revenue stemming from mobile devices. This was further strengthened with the purchase of WhatsApp Inc. for $19 billion in cash and stock, hoping to cash in on the international mobile market.
Yet, the surge has forced many analysts to reconsider and recalculate to furnish new price targets. Eric Sheridan of UBS leads the pack with the highest price target of $90 over the next twelve months. “We continue to favor Facebook as a core large cap Internet holding for excellent revenue growth at reasonable multiples to growth,” Sheridan shared with investors on Tuesday.
In similar fashion, other analysts have made their adjustments. Thomas Forte of Telsey Advisory Group, bumped his target to $82 from $70, while Mark May of Citigroup Global Markets Inc, raised his price target to $85 from $70.
Some analysts still hold their ground on their original target pricing explaining that a surge in stock price alone is not sufficient to make adjustments.
“You need to have a reason to adjust valuations beyond just because the stock has moved, “said Colin Sebastian, analyst at Robert W. Baird & Co. Business trends play a major role in determining the real value of stock.
Right or wrong, Facebook is gaining momentum by the day, and will surely see positive signs as it capitalizes from its mobile and advertising efforts.
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