Facebook got a boost Monday from an analyst who pointed to two unlikely factors for the social networking giant’s growth potential – women and Larry Ellison.
Needham analyst Laura Martin reaffirmed a buy rating on Facebook with a $40 price target. That may seem like a bold move given the stock’s three-week decline and growing worries about the effectiveness of advertising on the site.
But Martin said concerns about Facebook
advertising, especially after its rocky public trading debut, may be overstated.
“FB’s valuation has been under pressure because of skepticism that advertising may not ‘work’ on FB, and that therefore FB’s revenue growth may be disappointing,” she wrote.
But Martin highlighted a key trend in the last three weeks, noting how “Oracle and Salesforce.com have spent over $1B combined to purchase social marketing companies at higher valuations than Facebook.”
“These commitments of new money to the social space, of which Facebook is the anchor tenant, imply that well-regarded public companies are valuing Facebook more robustly than investors are valuing Facebook,” she added.
Oracle, led by CEO Larry Ellison, and Salesforce
, led by CEO Marc Benioff, have each been pushing the concept of the social cloud. That refers to the trend of businesses relying on computing power accessed through networks instead of in-house data centers – and how the rise of social networking and social media is creating companies new ways to reach customers.
Martin also argued that the market is underestimating the power FB has with women, who represent 85% of purchasing decisions in the US.”
She also referred to the much-awaited report from comScore which is expected to show that Facebook ads are actually more effective than many believe.
Facebook shares were trading up 2% to $27.66 in recent action Monday.