FB: Raymond James Ups to Buy on Q4 Trends, Mobile Monetization

Shares of Facebook (FB) are up 78 cents, or 2.5%, at $32.31 after Raymond James’s Aaron Kessler today raised his rating on the shares to Outperform from Market Perform, and introduced a $38 price target, based on 17 times his estimate for $5.2 billion of Ebitda in 2014.

Facebook is set to report Q4 results on Wednesday, January 30th, after market close, and the Street is estimating $1.51 billion and 15 cents a share in profit.

Kessler raised his estimate to $1.57 billion and 18 cents from a prior $1.5 billion and 17 cents, citing market research data that seem to suggest the company saw “strong” ad spending in Q4, a pickup in international markets, and progress in monetizing mobile use of the site:

We are increasing our 4Q ad revenue estimate by 6% to $1.35 billion (43% y/y vs. 36% y/y in 3Q) vs. consensus at $1.28 billion driven by 1) improved mobile ad monetization, 2) traction with new ad formats, and 3) improving international ad demand. Our checks with Facebook ad partners indicated that Facebook ad spend was strong in 4Q. For instance, Kenshoo indicating social ad spend for 1H12 increased ~36% y/y (vs. 12% y/y for paid search) and accelerated to ~50% y/y growth in 2H12. Additionally, international demand looks to be picking up, with both Kenshoo and AdParlor seeing global ad demand pick up, with Kenshoo noting strength in Brazil, Japan, and Europe. For 2013 overall, our ad revenue estimate increases by 2% to $6 billion (40% y/y vs. an estimated 36% y/y in 2012). Given the early positive feedback and traction from Mobile and News Feed as well as the Facebook Exchange, we believe Facebook is poised for strong ad revenue growth in 2013. Kenshoo noted that for many clients the increased social spend in 2013 will be additive to current budgets, while for others it will be a shift/re-allocation from other formats. Spruce Media noted added that it expects TV ad dollars specifically will migrate towards Facebook given the increased measurability of online vs. TV ad spend.

For the full year 2013, Kessler sees revenue of $6.77 billion and EPS of 74 cents, versus his prior estimate for $6.695 billion and 74 cents.