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. 

Get out top tech picks for your portfolio
Our top technology analyst recently infiltrated one of Wall Street's most exclusive gatherings... and left with three incredible investment opportunities, straight from the CEOs. These are profit-building strategies Main Street isn't meant to hear about -- so you must act now before someone shuts us up. Click if you want "industry insider" earnings -- NOW!


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2768037, ~/Articles/ArticleHandler.aspx, 4/20/2014 12:06:58 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement