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Facebook is back in vogue, but investors back small cap tech to deliver
by James Phillipps on Aug 09, 2013 at 13:04
Almost 15 months on from Facebook’s stuttering debut on the Nasdaq, the social network’s share price has finally climbed back to its flotation level.
The opening day of trading back on 18 May 2012 has already gone into investment folklore after the Nasdaq crashed under the sheer strain of the volume of shares changing hands.
Priced at $38, valuing the company at $104 billion – a record for any company on its market debut – the shares did manage to climb as high as $45 before closing just 23 cents higher than the float price.
It later transpired that Facebook’s investment bank advisers had been buying up piles of stock to prop up the price, but the success of this proved short-lived. They promptly went into free-fall hitting a low of $17.73 in September as fears of stagnating membership levels and its struggle to monetise its mobile application weighed heavily on sentiment.
But things all changed last month when the company’s bumper results smashed analysts’ expectations. Its second quarter earnings rose by 53% to $333 million and more importantly, the company stunned the market by announcing 41% of its $1.6 billion advertising revenue was from mobile.
So is it worth backing or has the easy money been made?
Thomson/First Call data shows that of the 40 analysts it tracks who cover the stock, 12 rank it as a strong buy and 15 a buy with only one apiece rating it a sell or backing it to underperform.
Henderson Global Investors’ head of global equities Matt Beesley believes the ability of companies to monetise the shift to mobile remains key for the sector.
‘Robust earnings by Facebook driven by strong mobile advertising revenues after a tough year since listing suggest it has finally managed to get on the right side of this trend,’ he said. ‘Other companies also continue to show evidence of managing this shift in consumer behaviour, with Google continuing to show robust top-line growth aided by mobile and tablet search revenues. Trip Advisor reported mobile monthly users up 216% year-on-year to 79 million and former Chinese internet darling Baidu showing the first signs that is starting to adapt to this shift with mobile search now accounting for 10% of sales.’
Despite this, several big name technology stocks have disappointed this year.
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