Updated from 10:08 a.m. to include information about privacy concerns.
NEW YORK (TheStreet) -- Facebook (FB) shares were getting a boost as Evercore Partners upgraded shares, noting the recent pullback seemed like a good opportunity to buy, and the company's new mobile ad network could be a massive game changer for the company.
Analyst Ken Sena upgraded shares to "overweight," boosting the price target to $75 from $69, as Facebook monetizes its mobile initiatives and its 1 billion plus monthly active users (MAUs) better than anyone in the industry.
"In a nutshell, FB now monetizes mobile time spent to the tune of 9:1 the industry (x-Search) which supports the notion that FB can meaningfully increase the size of the mobile advertising pie (versus just taking share)," Sena wrote in a note. He highlighted four distinct advantages Facebook has for mobile advertising, including how large it is on deskto (Facebook has 1.28 billion monthly MAUs), the ability to cross-device log in to Facebook, how large it is on mobile, and native ad formats.
"The first three areas of advantage address an important mobile industry issue in tying mobile ad attribution to the individual and to desktop behavior," Sena penned in the note. "Meanwhile, native formats help make better use of a smaller mobile screen size where every pixel counts."
Shares of Facebook were higher in early Thursday trading, gaining 0.56% to $60.83 on back of the upgrade.
Though the world is increasingly turning to mobile devices, be it smartphones, tablets, or wearable technology, Facebook's size and scope on desktop is unparalleled, as it's the largest social network in the world and is getting larger by the day. Sena noted that this is one of Facebook's "most valuable attributes," and is perhaps the only thing that can tie-in to what Google (GOOG) does with search, helping it generate the type of revenue perhaps only those two companies can from advertising.
Revenue for the first quarter of 2014 totaled $2.5 billion, up 72% year over year. First-quarter revenue of $2.36 billion was expected, according to Thomson ONE Analytics. Advertising revenue for the quarter was $2.27 billion, an 82% increase from the year-ago quarter, with mobile ad revenue representing about 59% of advertising revenue in the first quarter, up from about 30% of ad revenue the same time last year.
The largesse that Facebook enjoys on desktop allows it to have such a strong presence on mobile devices, as users turn to phones and tablets for accessing the Menlo Park, Calif.-based social network. "While FB's greater amount of time spent certainly contributes to higher per-user monetization, it is not the reason for it," Sena said. "Rather, if we compare FB's mobile monetization to the industry on the basis of costper-minute (in thousands), we see a 9x differential, supporting our view that attribution and formats are the key gating factors to mobile, not screen size, both of which FB stands to help the industry resolve."
Facebook's scale on mobile is far greater than any other company on the Internet, accounting for nearly 22% of all the time spent by users. When factoring in Instagram and Whatsapp, that number rises, much higher than the next largest competitor, Apple (AAPL), which includes time spent in standard iOS apps. "Moreover, as the efficiency of the FB delivered ad improves with scale and data efficiency, it has the potential to further attract third-party buyer and seller. Therefore, we see this scale as possessing favorable network effect which bodes well for the initiative longer-term," Sena said in the note.
Facebook monetizes users in different parts of the globe differently, with the highest average revenue per user (ARPU) coming from the U.S. and Canada at $5.85 per user. If Facebook is able to get to that number for the 15% of the global smartphone market, that gives Facebook another $2 billion pro forma opportunity.
The upgrade comes at a time when Facebook and its users are particularly concerned about their privacy, as Facebook gets bigger in breath and scope. Today, the company announced then when a new user joins Facebook, "the default audience of their first post will be set to Friends," the company said in a statement. It had previously been set to Public.
Facebook also noted that for those who are already on the social network, the company will start rolling out "a new and expanded privacy checkup tool, which will take people through a few steps to review things like who they're posting to, which apps they use, and the privacy of key pieces of information on their profile."
At the company's F8 developer conference, CEO Mark Zuckerberg took several steps to address these concerns. "Over the years, one of the things we've heard just over and over again is that people want more control over how they share their information, especially with apps, and they want more say and control over how apps use their data," Zuckerberg said during the keynote.
Zuckerberg noted that people were scared to use the Login with Facebook button, because it required people to originally share all of their data with the app, and potentially intrude on their friends. As such, Facebook launched the Anonymous Login, a way for people to log into apps without sharing personal information from Facebook with developers. "By giving people more power and control, they're going to trust our apps more, and use them more. That's positive for everyone."
-- Written by Chris Ciaccia in New York
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