Facebook Inc (NASDAQ:FB) shares are expected to perform positively on a long-term basis according to the expectations of analysts at Baird Equity Research. They issued a report to investors this morning, saying they are reiterating their Outperform rating on the stock, raising their price target to $34 per share and also raising their estimates for the end of 2012.
Baird analysts are basing their positive long-term outlook for Facebook Inc (NASDAQ:FB) on its opportunity for continued growth and improved monetization efforts. They believe that the social media giant will continue to expand its market share through the use of mobile apps, improved ad quality and an emerging ad exchange.
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They have raised their estimates for Facebook Inc (NASDAQ:FB)’s end of 2012. They now estimate the company’s revenue to be $1.5 billion instead of $1.45 billion, and they expect Facebook’s earnings per share to remain at 14 cents per share. That would include $300 million in mobile revenue, which is approximately double the company’s mobile revenue from the third quarter. Baird analysts have also increased their revenue estimates for Facebook Inc (NASDAQ:FB) in 2013 to $6.4 billion and 64 cents in earnings per share.
After performing field checks, the analysts said they believe Facebook Exchange, which was just launched recently, is making it possible for advertisers to “target consumers more effectively,” which increases the return on their investment. In the long term, they expect the company to launch a “third party ad network,” which would further expand Facebook’s market opportunity.
The main risk Baird analysts see to Facebook is ad saturation because of how rapidly the company has increased frequency of its ads. This presents a risk to the experience of users, so they see just limited opportunities to increase the frequency of those ads further. Thus they expect revenue growth will occur in terms of pricing because the performance of their ads is improving.
This morning shares of Facebook Inc (NASDAQ:FB) are trading mostly flat just above $29 per share.