Facebook Shares Rise to Record on Mobile Growth, Instagram
Comment of the Day

December 22 2014

Commentary by Eoin Treacy

Facebook Shares Rise to Record on Mobile Growth, Instagram

This article by James Callan and Kelly Gilblom for Bloomberg may be of interest to subscribers. Here is a section: 

Facebook Inc. shares rose to a record as the social network caps a year in which mobile advertising increased and marketing initiatives expanded with applications and video.

The shares advanced as much as 2.5 percent to $81.88 in New York trading, the highest price since Facebook’s initial public offering in May 2012. The stock has jumped 49 percent in 2014, a year of rally for the Standard & Poor’s 500 Index, which increased 12 percent.

?This year Facebook made further headway in mobile, a business that has flourished from a minor portion of ad revenue at the time of the IPO to a majority. Facebook’s acquisition of Instagram in 2012 for $1 billion has also been paying off: A Citigroup Inc. analyst last week said the photo-sharing app is worth $35 billion.

“While the shares have likely benefited from the recent market rally, we see growing confidence in the monetization prospects of Instagram as an impetus to the recent uptick,”

James Cakmak, an analyst at Monness Crespi Hardt & Co., said in an e-mail. He recommends buying the shares.

Facebook was trading at $81.57 at 11:57 a.m., up 2.1 percent, giving the company a market value of about $228 billion. The stock has more than doubled since the IPO. 

Eoin Treacy's view

Smartphones and social media represent a symbiotic relationship since the roll out of mobile phones and broadband is fuelling the evolution of social media and vice versa. 

Facebook has successfully monetised its portal and remains a leader within its sector with global reach. It is open to question whether Mark Zuckerberg’s overtures to China will be successful. Personally, I doubt whether China will allow Facebook access when it has home grown products such as Wechat (Tencent Holdings) or Weibo (Sina.com) over which it has a great deal of control. 

Facebook broke up out of a six-month range this week and a sustained move below the 200-day MA, currently near $72, would be required to question the consistency of the medium-term uptrend. 

Groupon is firming within its base and found support over the last couple of weeks in the region of the 200-day MA. 

LinkedIn is approaching its earlier highs and a break in the progression of higher reaction lows would be required to question medium-term potential for additional upside. 

Baidu continues to hold a progression of higher reaction lows and is benefitting from the same trend in the rollout of mobile broadband as the above companies. 


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