NEW YORK (TheStreet) -- Facebook (FB) continues to gain during Tuesday's trading session, adding to an overall 6% increase since the beginning of the week. By mid-morning, the stock had climbed 1.1% to $57.85.
The social network received a welcome boost from Deutsche Bank analyst Ross Sandler who reiterates a "buy" rating and notes fourth-quarter results, due at the end of the month, will provide the next upside for the stock.
"Unlike last quarter, we view sentiment as more balanced heading into 4Q results which should provide the next catalyst to the upside, hence we would add to positions," writes Sandler. "Engagement continues to increase broadly for Facebook, owing to the strong footprint in mobile. Monetization is firing on all cylinders according to our checks, and we wouldn't be surprised to see ad revenue growth re-accelerate potentially in 4Q."
A day earlier, SunTrust analyst Robert Peck reiterated his "buy" rating and upped the 2014 target price to $65 from $55. Peck also raised Facebook's fourth-quarter earnings estimate to $2.37 billion from $2.29 billion based on the integration of mobile advertisements, the better quality of advertisements on the site and the monetization of Instagram.
TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FB's very impressive revenue growth greatly exceeded the industry average of 9.2%. Since the same quarter one year prior, revenues leaped by 59.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although FB's debt-to-equity ratio of 0.04 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 10.37, which clearly demonstrates the ability to cover short-term cash needs.
- Powered by its strong earnings growth of 950.00% and other important driving factors, this stock has surged by 95.39% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- When compared to other companies in the Internet Software & Services industry and the overall market, FACEBOOK INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: FB Ratings Report