Facebook Drops Despite Bullish Analyst Comments

Gains in the pre-market suggested that Facebook (NASDAQ:FB) would continue last week’s rally heading into its highly-anticipated event on Tuesday morning. Early trading was catalyzed by bullish notes from analysts at Deutsche Bank and Oppenheimer, but by 10:30 a.m. shares dipped briefly below $31 on heavy volume.

What did analysts say?

“Recent comScore data suggests an inflection in U.S. desktop usage, implying mobile cannibalization may have slowed,” said analyst Jason Helfstein of Oppenheimer. “We expect 4Q:12 to be the first quarter where FB sees a meaningful contribution from FBX, the company‚Äôs real-time bidding exchange.”

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A lot of Facebook’s stock movement is a product of the uncertainty of its revenue streams. The company’s mobile monetization strategy is not mature enough yet to convince investors that the company’s high valuation — trailing-twelve months price-to-earnings ratio of 162.23 — is worth it. If desktop ad revenues stabilize on the back of higher contributions from Facebook Exchange, then the firm’s $34 price target could be quickly realized.

Deutsche Bank upgraded Facebook from “Hold” to “Buy” and moved its price target from $36 to $40. The bank commented: “Mobile Newsfeed Ads are the game-changer, but the ramp-up is happening much faster than our initial estimates and we see several new catalysts emerging. Ad revenue should growth north of 40% in 2013, well above consensus.” The firm sees as much as $800 million in news feed ad revenue per quarter by the end of 2013.

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