Other analysts upgraded Facebook's shares, citing impressive mobile results and a valuation more in line with the company's earnings trajectors. Mark Mahaney of Citigroup upgraded Facebook to a 'Buy', citing a better link between Facebook's fundamental earnings and its market value.
"What investors have for the first time since the FB IPO is fundamentals acceleration WITH a reasonable valuation," writes Mahaney in the upgrade, noting a price-to-earnings ratio of 30 and an earnings growth rate of 30%. Mahaney also highlights that growing fee revenue, in spite of a 9% decline in sequential revenue paid by Zynga, in concert with monetization efforts, minimize two of Facebook's biggest risks headed into earnings.
Specifically, the question was whether Facebook's usage and revenue generation trends could bolster its earnings outlook headed into 2013, regardless of whether top and bottom line numbers hit Wall Street estimates.A strong investor reaction to earnings released after the market close on Tuesday indicates Facebook's been able to both impress Wall Street on earnings numbers and the company's overall direction. After an initial stock surge after earnings were released, Facebook added to gains as executives detailed the beat on an earnings call with analysts, pushing shares over 10% higher on Tuesday evening. After a slew of analyst upgrades on, Facebook's shares continue to march higher, rising over 19% in Wednesday trading. Facebook highlighted highly anticipated new platforms like Facebook Exchange and its rebuilt iOS mobile app as drivers of strong mobile growth on the earnings call.
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