Here's Why Facebook, Inc. Shares Will Fly Above $85

Does this analyst make a good case or is it just more noise from Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 22, 2014 at 10:36AM
Technology and Telecom

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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Facebook, Inc. (NASDAQ:FB) gained 2% this morning after Credit Suisse upgraded the social media gorilla from neutral to outperform.

So what: Along with the upgrade, analyst Stephen Ju boosted his price target to $87 (from $65), representing about 39% worth of upside to yesterday's close. So while momentum traders might be turned off by Facebook's recent price pullback, Ju's call could reflect a growing sense on Wall Street that its monetization prospects are becoming too cheap to pass up.

Now what: According to Credit Suisse, Facebook's risk/reward trade-off is particularly attractive at this point. "We upgrade FB shares to Outperform (from Neutral) and raise our target to $87 (from $65) as we increase our mid-to-longer-term user ARPU growth trajectory expectation, following extensive analysis, to layer in monetization from the company's upcoming product releases," said Ju. When you couple that upbeat outlook with Facebook's recent price weakness, it's tough to disagree with Credit Suisse's upgrade.