Facebook Inc. (NASDAQ:FB) Chief Executive Officer Mark Zuckerberg’s decision last year to bet big on mobile software is paying off, with sales of ads on wireless devices now on track to surpass revenue from desktop computers.
Surging demand for mobile advertising helped profit and revenue top analysts’ estimates in the second quarter yesterday. The results sent shares of the world’s most popular social- networking service up as much as 28 percent, a record intraday gain, to the highest level since May 2012.
The earnings may finally quiet concerns, voiced by analysts and investors since Facebook’s initial public offering last year, that the rising popularity of smartphones and tablets is outpacing its ability to make money selling promotions to mobile users. By letting marketers show messages in the news feed on such devices, and shifting development efforts toward applications, Zuckerberg is delivering on his promise of making Facebook a “mobile-first” company, according to Jordan Rohan, an analyst at Stifel Nicolaus & Co. in New York.
“There’s latent demand for marketers to spend money on Facebook,” Rohan, who rates the shares a buy, said in an interview. “The company finally introduced the right set of ad products to facilitate that.”
Revenue rose 53 percent to $1.81 billion in the latest quarter, the company said in a statement yesterday. Profit excluding certain items was 19 cents a share. Analysts had projected profit of 14 cents on sales of $1.62 billion on average, according to data compiled by Bloomberg.
Facebook jumped 26 percent to $33.48 at 9:36 a.m. in New, and earlier traded as high as $34, according to data compiled by Bloomberg.
“Finally, the blowout quarter that Facebook bulls have been waiting for,” said Paul Sweeney, an analyst at Bloomberg Industries. “Among many impressive data points, I think investors will focus on the percentage of revenue from mobile of 41 percent, which was well above consensus.”
Facebook, which had priced its IPO at $38 a share, saw its stock slump as low as $17.55 in September. Even after today’s gain, the stock is 11 percent below its initial offering price. Concern about Facebook’s ability to shift to mobile has weighed on the company’s shares since its $16 billion IPO, the largest technology offering on record.
Even with the decline, the Menlo Park, California-based company traded at 115 times earnings as of yesterday’s close, more expensive than 98 percent of the companies in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.