Shares in Facebook Inc (NASDAQ:FB) have risen by more than 11 percent in the last five days of trading, and the firm’s value has doubled in the last three months. Analysts are finally confident that Facebook can turn its user base into revenue, and their price targets are not slowing down. Canaccord initiated coverage of the company today with a price target of $60.
The bullish number implies a further 22 percent rise in the value of the company in the year ahead. Canaccord analyst Michael Graham does, however, lay down a solid argument for his high valuation of the company.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Facebook population growth
Facebook Inc (NASDAQ:FB) has accounts from an estimated 1.2 billion unique people that use the service every single month. Graham believes that Facebook can grow to around 1.6 billion users by 2015 as it extends its reach into the developing world. Facebook will likely capitalize on trends that increase Internet penetration in emerging economies, including its own semi-charitable efforts to increase internet access across the world.
The big challenge for Facebook Inc (NASDAQ:FB) in terms of population growth would be gaining access to the Chinese market. The company is currently not operating in the country, but it is growing its relationship with the Chinese government and, vitally, Chinese businesses. Facebook’s policy on China is to surround the company and become so important that businesses in the country demand access to the social network.
Facebook advertising innovation
Facebook Inc (NASDAQ:FB) has been pushing new kinds of advertising on its social network, and advertisers are sitting up and taking notice. The firm’s efforts in mobile have been particularly well received, and that change is one of the major reasons for the positivity of analysts in recent months.
Canaccord analyst Graham sees that as the major driver of value at Facebook Inc (NASDAQ:FB). “Facebook’s sponsored stories product is at last compelling brand advertisers to commit more spend to mobile,” said the Canaccord report.
The $60 price target is a high one in the Facebook Inc (NASDAQ:FB) analysis world, but Graham still believes there is an upside to the prediction. Graham sees video ads and Instragram monetization as the most likely sources for that upside.
Facebook Inc (NASDAQ:FB) has been doing incredibly well, but its valuation is getting higher and higher. The firm is trading at more than 180 times last year’s earnings, and the $60 price target is 45 time expected 2015 numbers. Investors will have to decide for themselves what valuation is appropriate for the company.