Facebook Rises on Advertising Revenue Growth Potential

Facebook Inc. (FB) rose to the highest price in four months after an analyst at Sanford C. Bernstein & Co. said that investors have been underestimating sales growth potential for the world’s largest social network.

The shares gained 8.1 percent to $25.94 at 4 p.m. in New York, the highest close since July 26. The stock has declined 32 percent since an initial public offering in May.

Sales will be $6.98 billion next year and $8.65 billion in 2014, Carlos Kirjner, an analyst at Bernstein, projected in a research report today. Analysts on average estimated revenue of $6.41 billion for 2013 and $8.12 billion the following year, according to data compiled by Bloomberg. Advertising on mobile devices and more targeted promotions for desktop users will help propel growth, he said.

“Its revenue growth trajectory will be the main driver of Facebook’s stock performance,” Kirjner said. “Facebook just started monetizing mobile and we believe it has enough run-way to support revenue growth above consensus estimates for the next 18 to 24 months.”

Kirjner upgraded the shares to outperform from market perform and raised his 12-month price estimate to $33 from $23.

Facebook has been trying to assuage investor concerns about how quickly it can make money from the growing portion of its more than 1 billion users who access the service on smartphones and tablets. The company, which first rolled out its mobile ad service in March, said last month 14 percent of third-quarter advertising revenue, or about $150 million, came from ads tied to mobile devices.

Better targeted ads for users on desktop computers will also boost revenue, Kirjner said. That includes the Facebook Exchange, which enables companies to tailor ads on the service based on users’ Web-browsing history outside of Facebook.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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