Facebook shares hit new high as mobile ads take off
Mark Zuckerberg is staring down naysayers who hammered Facebook's stock after its debut two years ago, as shares surged to a new record.
Facebook rose as much as 6.7pc to $76.03 (€56.45) at the open in New York yesterday, topping the previous intraday high of $72.59 set in March.
Fuelling the rise, the company showed again that mobile advertisements are powering revenue and profit.
Facebook posted second-quarter sales yesterday that surged 61pc to $2.91bn (€2.16bn), exceeding analysts' average estimate of $2.81bn (€2.08bn). Mobile promotions accounted for 62pc of ad sales, up from 59pc in the last period. Net income more than doubled to $791m (€587m), with profit excluding some items at 42 cents a share, above the projection of 32 cents.
The gains underscore how far Mr Zuckerberg has brought the social network since its 2012 initial public offering, when its stock plunged on investor concern over the lack of mobile revenue. Now that the chief executive officer has made ads on smartphones and tablets Facebook's core business, he's building on that foundation with a mobile network to spread the company's ads across the web and wireless devices, as well as with video promotions and by boosting the effectiveness of ads.
"You pay up for growth as long as it doesn't become excessively overvalued, and I don't think this is," said Martin Pyykkonen, an analyst at Rosenblatt Securities.
Facebook shares have already soared 173pc in the past 12 months through to yesterday, the biggest rally in the Standard & Poor's 500 Index.
The company trades at 77 times reported earnings, compared to a multiple of 18.4 for the S&P 500.
Facebook is also among the most actively traded stocks in the equity benchmark, with an average of 42 million shares changing hands in the past 30 days. Only Bank of America and Apple had higher volume.
By contrast, other technology stocks haven't recovered from a 19pc selloff in the Dow Jones Internet Index that began in March. Twitter and Groupon have led the gauge lower with declines of more than 40pc this year.
Facebook's performance in the last quarter was spurred by brands and marketers paying higher prices for better-quality promotions, said David Wehner, the chief financial officer. Mr Wehner said the average ad price more than doubled from a year ago, even as ad impressions declined 25pc over the same period.
"Our tools and the products we're building are working," chief operating officer Sheryl Sandberg said, adding that the company now has 1.5 million advertisers.
"They're working to drive engagement, they're working to drive sales." (Bloomberg)