The world’s largest social networking site Facebook Inc (NASDAQ:FB) reported a 32 percent increase in the third quarter revenues, beating Wall Street expectations. It shows that the company can make good money in mobile advertising. Facebook generated $150 million from mobile ads during the third quarter, compared to $10 million in the second quarter. Investors have long questioned Facebook’s ability to make money in mobile advertising.

Facebook Inc (NASDAQ:FB) shares rose a record 23 percent, to $23.94 in New York trading. Facebook stocks had plunged almost 50 percent since the high profile IPO in May, i.e., more than $40 billion in market value. During a conference call with analysts, CEO Mark Zuckerberg said over a dozen services the company unveiled during the past six months are showing signs of success.

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Third quarter sales increased 32 percent to $1.26 billion, compared to analysts’ estimate of $1.23 billion. The company actually earned $311 million or 12 cents a share in profits during July-September quarter. But it had to pay for certain special items such as stock compensation expenses, and that resulted into Facebook Inc (NASDAQ:FB) suffering $59 million in losses. The company had earned a profit of $227 million in the same quarter a year ago.

In its mobile marketing business, the number of ads delivered rose 27 percent, while ad prices increased 7 percent. Zuckerberg said that mobile advertising prospects are promising, as users increasingly access the site through mobile devices. Today, more than 60 percent of 1 billion Facebook users are accessing the site on mobile, compared to just 47 percent a year ago.

“Our opportunity on mobile is the most misunderstood aspect of Facebook Inc (NASDAQ:FB) today,” says Mark Zuckerberg. “Most people underestimate how fundamentally good the trend toward mobile can be for Facebook.” Advertising revenues grew 36 percent Y-o-Y to $1.09 billion, while the payment revenue was up 13 percent.

Despite all the positive signs from the social media giant, BMO Capital Markets has an underperform rating for the company, with a $15 price target. It argues that mobile advertising may be impressive, but the Facebook Inc (NASDAQ:FB) stock still faces hurdles.

The stocks may come under pressure after the lock-up expirations, when more shares will be put up for potential trades. BMO says that the PC ad business, which generates higher ad revenues, may slow down. Additionally, mobile advertising could witness the same fate as other formats that slowed after the stellar initial performance. Users are increasingly realizing that their privacy is at risk, and it may lower the company’s user growth potential in coming quarters.