Facebook and Twitter had a good day in the public market, with each company picking up momentum from positive analyst comments. Both companies rose in the day, bucking a down day for the major U.S. exchanges.
At the end of regular trading, Facebook was up 3.19% to $72.03. UBS raised its price target for the company to $90, and indicated that “pricing strength” at the company (the cost per ad Facebook sells), is looking strong. Interestingly, the model UBS used to pick the $90 per share target includes shares pursuant to the WhatsApp purchase, but not the smaller firm’s revenue. UBS is right to call that decision “conservative.”
In practice, UBS is saying its target price for Facebook, with all the dilutive effects of buying WhatsApp, and zero benefit, is 25% more than its current trading price.
Twitter picked up a smaller 0.62% gain (technology stocks on average were down 0.37%), on news that MKM Partners reiterated its buy rating for the company, and raised their price target to $72 per share.
While Facebook may be seeing strength in its ad pricing, Twitter is not. According to Quartz, Twitter saw its ad rate slip 18% in the fourth quarter of 2013. Revenue is up at the firm, as more total spots are sold, but, as Quartz points out, advertisers are paying “less to do so.” That coupled with growth concerns regarding its active userbase has perhaps tempered investor appetite for Twitter shares. The company still trades far above its offering price, so while concerns about the company exist, the larger market remains bullish on the social giant.