Facebook Inc. (NASDAQ:FB) rose to the highest price since May 2012, the month of its initial public offering, amid optimism that the world’s largest social network can bolster sales from mobile advertising.
Facebook jumped 2.7% to $34.94 at 11:24 a.m. in New York, and earlier touched $35.07 for the highest intraday price since May 21, 2012, its second trading day. The stock hasn’t closed above the $38 IPO price since the day of its market debut.
The gains underscore increasing investor confidence that Chief Executive Officer Mark Zuckerberg can bring in more revenue from the growing number of users who access Facebook on wireless devices. Mobile ads, which generated 41% of Facebook’s revenue in the second quarter, are helping Facebook challenge advertising rivals such as Google Inc., according to Youssef Squali, an analyst at Cantor Fitzgerald.
“I would feel a lot more comfortable owning the stock here” than when Facebook held its IPO, Squali, who recommends buying the shares, said in an interview.
While Google accounts for more than 50% of the world’s mobile-ad market, it’s now growing more slowly than Facebook. Internet-search ads -- Google’s biggest strength --are less effective on mobile screens than on desktop computers, according to Scott Kessler, an analyst at S&P Capital IQ in New York.
Banner advertising, meanwhile, can be less relevant because it doesn’t typically target users based on their interests or habits, Kessler said. Google’s AdMob unit and Apple Inc.’s iAd service both focus on those kinds of promotions, which often appear at the top or bottom of a device’s screen.
Facebook’s mobile application has gained support from advertisers because it more closely ties ads to the activities of its 819 million users, said Michael Pachter, an analyst at Wedbush Securities Inc. in Los Angeles. Facebook has 1.15 billion members in total -- including people who just use it on desktop computers.
“The existence of a Facebook app on your phone makes you more likely to check on it day in and day out,” Pachter said.
Facebook has a price-to-earnings ratio of about 152, higher than all but five companies in the Standard & Poor’s 500 Index. By contrast, Google’s stock trades at about 26 times earnings, according to data compiled by Bloomberg. A higher ratio can signal that invesors think the company may report stronger earnings growth in the future.