Is the Facebook RALLY Here to Stay?
On Monday, Facebook (NASDAQ:FB) shares gained 4.7 percent, or $1.40, to end the day at $31.41. That’s still down 17 percent from its IPO price of $38, but the social network has now seen its third consecutive day of gains and shares have now climbed 21 percent since closing at $25.87 on June 5. Those lows came largely on investor worries about the company’s ability to keep increasing revenue and make money from its growing mobile audience.
However, the company has now recovered more than $10 billion of the $35 billion in market capitalization it lost following its IPO. Even its lowest point of $25.52 from less than two weeks ago now appears to be a distant memory.
What is the reason for the sudden recent rise? Facebook has been spending a lot lately, but most of it has been on acquisitions that are expected to eventually help the company get rid of its technical rough edges. On Monday, it acquired Face.com, a facial recognition software maker whose technology the social network has used for a while. It also launched Facebook Exchange, a platform for real-time ad bidding, last week, prompting R.W. Baird analyst Colin Sebastian to write a positive review of the social network to investors. Sebastian reiterated an Outperform rating on the company’s shares and his $37 price target, saying that “there are signals the company is developing a third-party ad network” that may help in monetizing mobile usage much better.
Wedbush analyst Michael Pachter told MarketWatch that the launch of Facebook Exchange showed “that they are trying.”
“The important thing is that they are mixing it up, trying to find ways to better monetize, and I think that is important,” he wrote. “I don’t think any of us can know whether allowing access to browser history really makes advertising more effective, but Google (NASDAQ:GOOG) does it and people just love them,” he added. “It makes sense that this will work for Facebook, and I think that the market is finally seeing signs that Facebook management cares about growing revenue.”