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Why Facebook Shares Were Liked

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Today, BTIG Research upgraded Facebook (NASDAQ: FB  ) from neutral to buy, fueling some investor optimism over the social networking giant's progress in monetization.

So what: Along with the upgrade, analyst Richard Greenfield planted a price target of $68 on the stock, representing about 38% worth of upside to yesterday's close. While value investors might be turned off by the stock's recent resurrection, Greenfield believes that there's plenty of room to run given Facebook's stickier-than-expected user base, and underappreciated Instagram business.

Now what: BTIG likes Facebook's risk/reward trade-off at the moment. "Our upgrade is based on the view that Facebook mobile advertising has gotten notably better and that consumers, at least for now, do not appear to be reducing their usage based on the heavy ad-load," noted BTIG. "Furthermore, we believe that Instagram is an asset that may redefine what advertising means, particularly on mobile devices." Of course, with Facebook shares having doubled over the past four months, and trading at a forward P/E of 50, I'd wait for a wider margin of safety before betting too much on that bullishness. 

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9/23/2016 4:00 PM
FB $127.96 Down -2.12 -1.63%
Facebook CAPS Rating: ***