Facebook Inc (NASDAQ:FB) is expected to release its third quarter earnings at the end of this month, and there are two big questions that the company will need to answer. Has it been able to grow online ad revenues, and has it found a way to increase its presence in the smartphone and tablet space? Goldman Sachs analyst Heather Bellini thinks that Facebook is impressing advertisers and that the stock is a buy because even if expectations are slightly too high and the price falters, it’s nothing more than a good opportunity to buy quality stocks at a cheap price.

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Facebook Inc (NASDAQ:FB)’s new product cycle

“As we look out over the next 12-18 months we see powerful new product cycles relating to video ads, Instagram, and even graph search,” Bellini writes. “Furthermore, we believe advertisers continue to be impressed with the ROI on their FB spending, which is helping to drive more dollars from offline to online.”

Goldman Sachs is expecting total revenue of $1.84 billion, below the consensus estimate of $1.9 billion, and significant growth in mobile ad revenues, with a 12-month price target of $58 compared to around $51 right now.

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Facebook Inc (NASDAQ:FB) advertisements

Firms are reporting that advertising on Facebook is the second most effective way to connect with customers after search engine ads. It’s often easy to forget that the bulk of Facebook Inc (NASDAQ:FB)’s operations are meant to keep the audience engaged and returning frequently for little or no revenue, just so they can make a compelling case for advertising dollars. There were concerns earlier in the year that Facebook had fumbled the popular transition from web browsers to smart phone apps, but now the company seems to have pulled things around.

Bellini expects desktop ads to fall slightly this quarter, but that was probably inevitable, reflecting the changing ways that people interact online. Staking too much on a fading business model is exactly what gets IT businesses into trouble, and seeing Facebook Inc (NASDAQ:FB) put their emphasis on mobile is encouraging for the long term.

“We continue to view Facebook Inc (NASDAQ:FB) as one of the prime beneficiaries of the shift to mobile,” says Bellini. “With daily reach rivaling the largest tent pole TV broadcasts and ever improving targeting functionality, we see significant opportunity for Facebook to drive higher ad pricing.”

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