Institutional Investors Too Underweight Facebook Inc (FB): Citi

Institutional Investors Too Underweight Facebook Inc (FB): Citi

Facebook Inc (FB): has had a great first half of 2015.  The stock is up nearly 13.50% year to date and hit a new all time high during trading today at $89.25.  Additionally, Facebook just days ago surpassed WalMart Stores Inc.’s valuation of $223.7 billion with their new market cap of $246.8 billion.  Investors are especially bullish on the announcement that Facebook is preparing to monetize Instragram with their ad targeting software.  However, despite the good news coming out of Facebook, Citigroup concluded from a survey of institutional investors that Facebook is still very “under-owned”.

Survey of top 40 institutional investors’ holdings among large cap internet stocks proves Facebook could have some room to run

Citigroup’s survey was conducted among the top 40 institutional investors, representing 62% of the total institutional holdings among the large cap internet stocks. Excluding index fund holdings, the results were then compared to the stock’s weight within the S&P 500. The results showed that institutional money managers were overwhelming overweight shares of Expedia Inc. with 215% overweight compared to the S&P 500.  At the other end of the spectrum, Facebook was found to be one of the lowest holdings among institutional investors, with -12% below the S&P 500 weight.

Citigroup bullish on shares of Facebook

As of this writing, Citigroup currently has yearly target set at $97 for Facebook, or about 10% above Tuesday’s close.  “We believe FB and GOOGL may have the greatest near-term opportunity among large-cap internet to benefit from portfolio re-weighting if they execute consistent with current investor expectations,” detailed a report from Citigroup (MarketWatch). Aside from solid mobile ad revenue growth and valuation expansion, Facebook’s acquisitions such as WhatsApp, Oculus, and Instagram are becoming the key drivers of long term growth for Facebook.

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Overall, Facebook has made huge strides in its business even in the past three years.  The company initially stumbled with a less-than-smooth IPO several years back and the consistent question of where long term growth would come from.  Additionally, its acquisitions were initially largely criticized, but now are starting to really make an impact and will only become more valuable as time goes by.  Ultimately, the good news has not caught up with Facebook, who still is emerging out of its old reputation.

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