Why Facebook, Inc. Might Outperform in 2014

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

What: Shares of Facebook, Inc.  (NASDAQ: FB  ) climbed nearly 2% this morning after Susquehanna upgraded the social networking gorilla from neutral to positive.

So what: Along with the upgrade, analyst Brian Nowak boosted his price target on the stock to $68 from $52, representing about 26% worth of upside to yesterday's close. Facebook shares have been volatile in recent months, but Nowak believes that the concerns over ad loads and teen usage are greatly exaggerated.

Now what: According to Susquehanna, Facebook's risk/reward trade-off is pretty attractive at this point.

"FB's decision to not significantly increase the number of sponsored stories as a percentage of newsfeed is a positive long-term move as restricting supply growth in an auction pricing model, combined with improving ad quality and conversion (which FB is focused on), is likely to lead to even faster ad dollar growth," noted Susquehanna. "Further, Instagram is still a greenfield ad opportunity (ads just starting in Nov.)."

Of course, with the stock up 140% from its 52-week lows and trading at a forward P/E of 50, waiting for a wider margin of safety before betting on that growth might be prudent. 

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