Shares of Facebook Inc (FB) reached a new 52-week high of $38.31 on Wednesday, Jul 31, 2013. Most significantly, for the first time since its Initial Public Offering (“IPO”), Facebook succeeded in crossing the psychological barrier of $38.00, the high end of its IPO price range.
Facebook’s IPO on May, 18, 2012 was spoiled by mismanagement and technical glitches that cost stock brokers and investors millions of dollars. Although the stock debuted at $42.05, it closed the IPO day with a gain of only 23 cents.
Facebook’s sky-high valuation, unproven monetization efforts on the mobile platform and a slow advertising growth rate were blamed for the modest gain. Following the debacle, the company’s share price plunged to a 52-week low of $17.55 on Sep 4, 2012.
However, the company’s focus on improving mobile exposure helped the shares rebound over the next 5 quarters. Facebook shares have surged 87.1% compared with 25.0% increase for the S&P 500 over the last 12 months.
Moreover, the impressive second quarter results further helped Facebook to reach its 52-week high. The bullish run has been primarily driven by increasing mobile offerings, which boost customer engagement. The launch of the mobile App center for Apple’s (AAPL) iOS and Google’s (GOOG) Android-based devices helped Facebook to expand customer base quickly.
To boost customer engagement in mobile, Facebook launched Twitter-like hashtags (#), Facebook Home and Instagram’s video application. The company has also launched a number of new products to woo advertisers.
These offerings have significantly improved its customer base, which attracted advertisers. At the end of the second quarter of 2013, monthly mobile active users (MAUs) were 819 million, up 51.0% from the year-ago quarter. The "Facebook for Every Phone" initiative recorded more than 100 million active users.
More importantly, mobile ad revenues contributed 41% of total ad revenues. We believe that this is a significant achievement for Facebook within a very short span of time. Facebook did not report any mobile revenues at the time of its IPO.
We believe that Facebook’s massive mobile user base represents a tremendous growth potential. We also expect the company to continue to pursue strategic acquisitions that will help it to further monetize this huge user base.
Moreover, the upcoming new products such as the Reader and television-like spot offerings for advertisers (reportedly for $2.5 million a day) are expected to drive top-line growth going forward. Additionally, improving customer engagement will help it to aggressively compete in the ad market against the likes of Google and LinkedIn (LNKD).
Currently, Facebook has a Zacks Rank #1 (Strong Buy).
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