Facebook Hits Four-Month High

As most anyone knows, it’s not been a great six months for Facebook in terms of its IPO. Its declining stock value has been a constant source of headlines—shares are currently down 32 percent from their opening value in spite of rising a full 30 percent in the past two weeks. Still, a glimmer of hope shined for investors when the stock rose 7.6 percent Nov. 26, reaching their highest point in the past four months.

Nomura Equity Research released an encouraging report for current and would-be Facebook investors today, “3 Drivers to ‘Like’ in ’13—Outgrowing Mere ‘Optionality.’” The firm issued Facebook a “buy rating” and a target price of $32. Nomura analysts note that although the stock underperformed the market by 6,200bp in the third quarter, it has out-performed by 3,400bp thus far in the fourth quarter. The report describes three drivers that will continue to drive growth in Facebook stock moving into 2013.

Nomura first cites impressive growth in Facebook’s mobile ad revenue, which increased from $20 million in the second quarter to $152 in the third quarter. As Facebook continues to draw new money into its mobile ad market, Nomura expect the company to generate $315 million in mobile ad revenue in the fourth quarter and $1.44 billion in 2013, driving 63 percent of Facebook’s overall ad growth in 2013.

Likewise, ad revenue will continue to generate from the Facebook Ad Exchange, which Nomura expects to increase to $450 million in 2013 revenue, driving 30 percent of total 2013 revenue.

Finally, Nomura predicts desktop-sponsored revenue to increase to $108 million next year—7 percent of total ad revenue growth.

Based on its estimates, Nomura increased its Facebook price target from $27 to $32.