The recent market volatility has been no problem for Facebook (NASDAQ:FB). Since the company’s lock-up expiration in mid-November, the shares have surged from $19.80 to $25.83.
Why the move? One reason is that Wall Street analysts are getting bubbling. For example, Bernstein Research’s Carlos Kirjner has upgraded Facebook from a market perform rating to outperform, and he increased his price target from $23 to $33.
In his report, Kirjner points to the enormous potential in the company’s mobile business. Consider that Facebook counts over 500 million mobile users. And yes, the company has just started to monetize this traffic with its “sponsored stories” program. According to Kirjner, it looks like the revenue lift could be substantial.
BTIF’s Richard Greenfield has also gotten more bullish and thinks Facebook will have a blowout fourth quarter because of the acceleration from the mobile business. He forecasts a revenue growth rate of 42%, which would be up from 32% in Q3. He also increased his revenue projection for 2013 from $5.6 billion to $6 billion.
Such views are quickly becoming the consensus on Wall Street. As a result, investors can’t seem to get enough of Facebook’s stock. In the latest quarter, Viking Global Management picked up 4.1 million shares, and Tiger Global Management boosted its stake from 2 million shares to 11.7 million.
In fact, investors have recently been warming up to other beaten-down social operators, such as Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA). The irony is that these hot growth companies now look like value plays!
Despite all this, investors should still be cautious. Facebook’s move may have much to do with panic buying from investors who don’t want to miss out on big profits.
Of course, this means the stock will likely get overextended. After all, Facebook is now trading at a hefty forward price-to-earnings ratio of 40x. So, holding off on the stock is probably a good idea for now.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
Comments are currently unavailable. Please check back soon.