Facebook Rises on Optimism for Mobile Ad Sales Increase

Jan. 3 (Bloomberg) -- Bloomberg's Dominic Chu looks at Facebook stock and what is fueling a nearly 60 percent rally off lows reached in September. He speaks on Bloomberg Television's "In The Loop."

Facebook Inc. (FB), owner of the largest social-networking service, rose 5.2 percent amid optimism that the company will be able to step up sales growth from advertising shown to users on mobile devices.

The stock jumped to $28 at the close in New York. Today’s gain came after analysts at JPMorgan Chase & Co. increased their Facebook share-price target to $35, citing “strong advertising trends.”

Facebook is benefiting from growing interest in new ad features that let companies target the more than 1 billion users on the service, many of them by way of wireless gadgets. Revenue tied to mobile advertising should surpass sales from similar spending on desktops in 2014, according to JPMorgan.

“We are incrementally positive on Facebook shares into 2013 as we believe it remains very early in the trajectory of Facebook’s mobile advertising,” the JPMorgan team, led by Doug Anmuth, wrote today in a note. “Importantly, we believe marketers are also realizing that there is branding and awareness value in Facebook ads and that users don’t necessarily have to click through to drive returns.”

The company probably boosted overall advertising growth 49 percent in the fourth quarter of last year, up from a 36 percent increase in the third quarter, the analysts said. Mobile, driven by the growing number of users accessing the service on smartphones and tablets, should make up 27 percent of ad revenue in the quarter, up from 14 percent in the third quarter.

For 2013, Facebook should generate $6.69 billion in sales, up 7 percent from an earlier estimate, and $8.24 billion in 2014, up 7.6 percent from the prior estimate, according to the note.

Facebook Exchange

While mobile is boosting revenue, desktop advertising is also benefiting from new ad tools, including the Facebook Exchange, which helps companies target marketing messages based on users’ past Web activities.

Checks with advertising agencies, partners and marketers all “came back more positive” than expected for the Facebook Exchange service, Ralph Schackart, an analyst at William Blair & Co., wrote today in a note.

“Our channel checks suggest FBX ads are being rapidly adopted and are significantly underpriced, with the potential to increase threefold,” Schackart wrote.

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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