Facebook is slowly regaining its value, an indication that the social networking giant is gaining back the confidence of investors. The company's stock was trading around $30.14 per share at the time of this writing.
The market is bullish on Facebook Inc (NASDAQ:FB), as they observe a significant revenue momentum from the company. Analysts at Deutsche Bank recently upgraded their rating for the shares of the company to “buy”, with a $40 price target. In addition, the research firm believed that the social network giant’s mobile news feed ad is a game changer. They also consider Facebook Gifts as a new catalyst for the company.
A report from Evan Wilson and Brian Liang, analysts at Pacific Crest Securities,said they remain cautious on Facebook Inc (NASDAQ:FB) for the long-term due to concerns of mobile cannibalization , potential user declines in maturing markets, and a reacceleration in hiring and a stretched in valuation.
Wilson and Liang told investors to pay attention and should not miss the following factors, which have an impact on Facebook Inc (NASDAQ:FB):
- Mobile revenue is cannibalistic
- Mobile paid impressions maybe more limited than assummed
- Mobile is not eliminating risk of DAU decline in mature markets
- Hiring has reaccelerated
- Evidence of existence of true social advertising is still limited
According to the analysts, Graph Search fixes the company’s search, but is limited. Wilson and Liang wrote, “Facebook Inc (NASDAQ:FB) is doing the right thing in fixing its search engine. However, we think the quality of results could suffer outside the “People Search” from a lack of meaningful content due to a combination of factors, including a combination of privatized content and search results based mainly on likes.”
Wilson and Liang emphasized that their opinion about the company is somewhat similar with the bulls in the market that the social network giant is capable of controlling its financial destiny in Q3 and Q4, as the company continues to load its website with apps and ads. However, they think the company’s valuation is stretched beyond the evidences available to support the creation of true social advertising.
The analysts also noted that mobile is not fixing Facebook user problem. According to them, the conversation about the company is centered on its potential monetization growth, but they believe some risk would shift back to the issue of Facebook's users. They noted that over the past three months, users declined in both the United States and United Kingdom, based on the study by Socialbakers. Furthermore, they think Facebook’s desktop products are becoming less useful to users.
Wilson and Liang emphasized that Facebook needs new functionality to drive its usage and Graph search is not the answer. According to them, Facebook Inc (NASDAQ:FB) still failed to show the value of social advertising.