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Facebook Gets Early Present From Wall Street: 8% Lift in Stock Price

Two Analyst Reports Home in on Mobile's Money-Making Potential

By Published on . 1

Facebook got an early holiday gift from Wall Street today: a 7.84% increase in its stock price.

The company's stock climbed $1.94 to $25.94 after two analysts took a brighter view on the social network's prospects. Sanford Research's Carlos Kirjner offered a bullish take and upgraded Facebook from market perform to outperform, while a more subdued Rich Greenfield of BTIG changed his rating from sell to neutral.

Mr. Kirjner projects Facebook's 2013 revenue will reach $6.976 billion, 9% higher than Wall Street 's consensus and writes of Facebook's mobile news-feed ads: "We also believe that at this point and for the near-to-medium term, its revenue-growth trajectory will be the main driver of Facebook's stock performance."

Mr. Greenfield, who downgraded Facebook's stock to sell less than two months ago citing the low quality of advertising on the site, also homed in on its mobile growth and observed that jacked-up mobile ad loads make it likely that the company will have a huge Q4.

He notes that it's "common" for the first 20 to 25 posts in users' mobile news feeds to be sponsored ads. However, his long-term outlook for the company is more bearish, since he believes stuffing news feeds with ads will eventually alienate users, its most powerful asset.

"While we believe Facebook is making a serious user experience mistake that will be problematic longer-term, there does not appear to be a discernible near-term impact on daily active users and/or engagement (time spent)," he wrote.

While the picture being painted of Facebook's financial health for Wall Street isn't altogether rosy (the stock is still well below its $38 IPO price), today's gains after a long holiday weekend do suggest that observers are beginning to be optimistic about the company's outlook and thus inclined to give more weight to good news about it.

The stock movement also implies that Facebook's assertions about the enormous revenue-earning potential of its nascent mobile ad products have credibility in the marketplace. (Facebook's stock also got a significant bump in September after CEO Mark Zuckerberg appeared at TechCrunch Disrupt, where he spoke at length about mobile strategy.)

Wall Street seems to like the predictions it's hearing about Facebook's near-term, however. The company isn't saying much of late, but did announce minor updates to its data-use policy on the Wednesday before Thanksgiving. They include product changes such as reminders about what user content is visible to which people on Facebook and tips on curating a user's own Facebook timeline.

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