Facebook Closes at Record High on Revenue Growth Optimism

Facebook Inc. (FB) shares closed at a record after analysts this week said the company is getting better at making money and engaging users.

Facebook rose less than 1 percent to $58.23 at a market capitalization of $147.9 billion, beating its closing price of $57.96 on Dec. 24. The share price doubled last year as Chief Executive Officer Mark Zuckerberg focused on gaining mobile users.

The Menlo Park, California-based company has improved advertisers’ ability to target its more than 1 billion members, according to Ross Sandler, an analyst at Deutsche Bank AG who has a buy rating on the stock. Facebook has also expanded promotions on mobile devices and in other countries, he said.

“Monetization is firing on all cylinders according to our checks, and we wouldn’t be surprised to see ad revenue growth re-accelerate” in fourth-quarter results, Sandler wrote in a note to investors yesterday. “Engagement continues to increase broadly for Facebook, owing to the strong footprint in mobile.”

Facebook, which said it was limiting the number of advertisements it showed users, is now charging more for the promotions, Robert Peck, an analyst at SunTrust Robinson Humphrey Inc., said in a Jan. 6 note to investors.

Wall Street didn’t know how they were planning to grow revenue, and now you’re seeing that pricing has more than compensated as there’s more and more demand for their ad units,” he said in an interview.

Facebook said it will report fourth-quarter earnings on Jan. 29. Analysts project that the company will post $2.34 billion in fourth-quarter sales, according to the average of estimates compiled by Bloomberg.

Social-Media Rally

Social-media stocks, which also include microblogging service Twitter Inc. (TWTR), have soared in recent months amid optimism that social-media advertising will grab a bigger slice of the market for digital promotions.

As marketers shift spending to social-media services, both Facebook and Twitter will expand their share of the digital-ad market, according to EMarketer Inc. By 2015, Facebook will grab an estimated 9 percent, up from 5.9 percent in 2012, while Twitter may take 2.2 percent, up from 0.6 percent, the researcher said last month.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

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