Home Business Facebook shares jump 25% after stronger than expected mobile ad sales

Facebook shares jump 25% after stronger than expected mobile ad sales

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Facebook shares jumped by more than 25% at the market opening on Thursday, after it beat profit forecasts with stronger than expected mobile ad sales.

On Wednesday, the social networking giant had reported profits of $333 million in Q2 2013.

When trading began in New York, Facebook shares were 25.6% higher at $33.30, the highest since May 2012.

Facebook, which is the world’s largest social networking company, floated on the Nasdaq at $38 a share last year.

Following the release of the latest results, at least 16 brokerages raised their price targets for the firm.

“Facebook has discovered the formula to begin significantly extracting value from its 1.16 billion global users,” said JMP Securities analyst Ronald Josey.

A year ago, Facebook had no mobile advertising and many analysts were skeptical about the firm’s ability to make money in the arena.

Internet companies have been struggling with how to display adverts on smaller screens, as more people use their smartphones to access the web.

Facebook’s revenue from smartphones and tablets made up almost half of total advertising revenue in the second quarter.

Facebook shares jumped by more than 25 percent after it beat profit forecasts with stronger than expected mobile ad sales

Facebook shares jumped by more than 25 percent after it beat profit forecasts with stronger than expected mobile ad sales

The company is widely expected to launch mobile video advertising in the fourth quarter.

“Facebook’s massive audience should be irresistible to brand advertisers as the company preps to launch 15-second video ads, which could be Facebook’s next billion-dollar business,” said analysts at Jefferies & Co.

Meanwhile, analysts at Morgan Stanley expect video advertisements to boost Facebook’s revenues by more than 10%.

In a statement, Facebook chief executive Mark Zuckerberg said: “The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future.”

According to chief financial officer David Ebersman, 20 billion minutes a day were spent on Facebook in June.

“This quarter marks the end of our first year as a public company and I think we’ve created a good foundation for the future,” said Mark Zuckerberg on a call to discuss the earnings.

Facebook made $655.6 million from mobile ads between April and June – more than 41% of the $1.6 billion in overall advertising revenue, compared with 30% for the same period last year. The number of mobile users expanded 51% to 819 million.

“I’d say that Facebook is in a unique position with the ad market right now in that it is very far ahead of any other major ad platform in mobile display advertising,” said Clark Fredricksen of research firm eMarketer.

Facebook has focused on perfecting its ad sales programmes. Last month, it announced changes to its Ads Manager which it said would provide advertisers with better data.

In April, Facebook won back General Motors almost a year after the car company pulled advertising from the site.

Analysts said Facebook’s rival Google has fared less well in the mobile advertising market so far.

Last week, Google posted second-quarter results which fell short of Wall Street’s expectations.

“The Facebook versus Google debate will return to the investment community, after a year-long hiatus,” Stifel Nicolaus analyst Jordan Rohan said.

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