Facebook Passes IPO Mark, But Is More Growth Ahead?
The roller coaster ride for Facebook (NASDAQ:FB) ended Friday after stock surpassed its elusive IPO price, edging that mark to close at $38.05 in New York. After soaring 30 percent in late July on its spectacular revenue growth, Facebook has won back the confidence of investors. The social media giant has proven its mobile strategy is working, and many are pointing to the potential for far more growth.
In less than one year, Facebook has restored its position in the markets and proven it deserves a valuation of $100 billion. The shift came in the company’s ability to solve the mobile device conundrum. A look at the figures says Facebook has turned its weakness in the mobile sphere into a strength.
Mobile ad revenue accounted for 41 percent of the company’s total ad take in the second quarter, a jump of 30 percent compared to the quarter prior and, more importantly, a 100 increase compared to the year prior, when the company mobile ad take was nil. As Bloomberg pointed out, that has investors thinking CEO Mark Zuckerberg is a leader to stand behind.
Pivotal Research Group’s Brian Wieser told Bloomberg the return to form for Facebook is a vindication for Zuckerberg and proof he can take criticism and channel it into positive action. Wieser told the news outlet Facebook “this last quarter proved everything we’ve been saying about mobile.” The analyst is calling Facebook a buy at the moment.
Of course, buying at $38 or above is betting the stock has more growth potential. On this note, analysts are confident Facebook has what it takes. According to Bloomberg data, at least 11 analysts have Facebook at targets above its IPO price (where it currently sits), while Goldman Sachs analysts set the price target at $46. Clearly, there is confidence Facebook can roll well past the landmark it reached this week.
Mark Zuckerberg and his team showed they have the ability to navigate the world of small-screen devices, and now Facebook is concentrating on increasing the earning potential of its mobile ads. According to Bloomberg, the next step is making ads reminiscent of TV spots that will play on user’s news feeds. This move would give Facebook the opportunity to charge more to advertisers, yet doubts about users’ patience for them are a concern.
A study by Greenlight says there’s an answer for ad fatigue: offer users a paid opt-out. The poll showed there are plenty of users who’d be willing to pay a small fee ($5 to $10) every month to have ads removed from their Facebook experience. The estimates of potential income are staggering, but Greenlight quoted Biz Stone of Twitter saying it could amount to $12 billion a year for Facebook.
There are options on the table for Facebook moving forward, and there’s no reason to believe the company won’t try some or all of them to continue pushing the envelope. At this point, the IPO price seems like a stepping stone on the way to greater valuation. There’s plenty for investors to “like” at the moment.