Facebook chief executive officer Mark Zuckerberg keeps telling investors he is building a “mobile first” company. They finally got the message, sending the shares to the highest close since their debut trading day.
Facebook rose 1.5 percent to US$38.05 on Friday in New York, a closing price not seen since the social-networking company’s May 18, 2012, initial public offering. The stock had tumbled to a low of US$17.55 in September, less than half the US$38 IPO price.
The milestone underscores Zuckerberg’s recovery from one of the worst IPOs in a decade, with a mobile-advertisement business that is now on track to propel sales to more than US$16 billion by 2017. After absorbing ridicule and litigation in the wake of its botched debut, Facebook is winning over shareholders and advertisers with its mobile strategy — and cementing its position as a fast-moving competitor to Google and others.
“The question today is, is the business now strong enough for a US$100 billion valuation?” Youssef Squali, an analyst at Cantor Fitzgerald, said in an interview. “This is what the US$38 IPO price implied and, yes, they have proven that they deserve that kind of valuation considering their successful move to mobile over the last three to four quarters.”
The rise also boosts the wealth of Zuckerberg, 29, who founded the social-networking company in 2004 while at Harvard University. He ranks above Microsoft CEO Steve Ballmer and Dell founder Michael Dell on the Bloomberg Billionaires Index, according to data compiled at the end of trading on Friday. Zuckerberg is No. 37 with a net worth of US$18.6 billion, the data show. His fortune has swelled 52 percent this year.
Over the next 10 months, Facebook released a steady stream of new advertisement offerings tailored to the smaller screens, which began to lure advertisers and reassure investors. The stock rallied gradually until July 24, when the company reported second-quarter profit and revenue topping analyst estimates. Zuckerberg also said mobile advertisements generated 41 percent of sales, up from 14 percent a year earlier, sending shares of Facebook soaring 30 percent for their highest one-day gain on July 25.
“The big worry after the IPO was moving to mobile after desktop,” said Giri Cherukuri, a portfolio manager at Oakbrook Investments LLC in Lisle, Illinois. “That’s not a worry anymore.”
Even after closing above the IPO price, the rally may continue. Analysts at Goldman Sachs Group have a US$46 target price on the shares, while at least 11 others set targets of more than US$38, according to data compiled by Bloomberg.
Renee Morrison, director of client services at Empyrion Wealth Management in Roseville, California, bought 100 shares of Facebook at US$38 apiece on the first trading day. Disappointed by negative media attention at the time that she blames for the stock’s decline, Morrison still kept her stake: “I would love for it to go like Google and some of the other larger technology companies,” Morrison said in an interview. “It would be kind of cool if it doubled. I’ll just let it ride to US$50 and decide from there.”