Shares finally go above the May 2012 offer price - but there are other hurdles ahead
FACEBOOK has reclaimed its Wall Street heavyweight title after shares rose above their $38 offer price for the first time since its IPO in May last year. The company's stock value soared by more than 40 per cent following a strong second-quarter earnings report published this week, which analysts claim helped soothe investors' doubts about its ability to raise revenue from its millions of mobile users. Early on Wednesday, shares briefly touched $38.31 before pulling back to $36.80 by the time the market closed. The boost is seen as a welcome change to the chaos of Facebook's 18 May 2012 debut when share prices crashed by more than $20 in under three months, wiping almost $50bn off the company's market value. According to the New York Times, investors have now "warmed to the company as its management demonstrated that it can increase profits and not just users". Their renewed confidence led this week's surge which saw founder Mark Zuckerberg's paper fortune rise by just under $5bn to nearly $17bn, according to the Bloomberg billionaires index. Key to Facebook's increasing dominance has been its ability to push Mobile ad sales on the site, which now comprise 41 per cent of its business. It also reported a 51 per cent increase in mobile users to 819m, leading analysts to rapidly rethink their outlook and punishing those who bet on a decline. "They were so far above where I thought they were doing, we had to be intellectually honest and say you don't want to short this stock anymore," Rich Greenfield, a BTIG analyst, told the Wall Street Journal. Yet despite its successes there remain significant hurdles ahead for Facebook. Investors warn that potential new areas for growth - such as in video advertising expected to begin later this year - could be offset by mobile messaging platforms such as Snapchat and WhatsApp which risk drawing away the site's younger fans. A push for an increase in ads in Facebook's news feed may also turn off users. "About one in 20 items in the news feed, the main flow of items that a Facebook user sees, is an ad," the New York Times reported. ·Source: The Week UK
