Facebook Inc.'s shares rose Monday after a Stifel analyst upgraded his rating on the social media company's stock.
THE SPARK: Analyst Jordan Rohan increased Facebook's rating to "Buy" from "Hold," and set a $29 price target, saying it is one of the most compelling investments in the Internet sector right now.
The analyst argued that negative impact of declining engagement and poor advertising efficacy have already been priced into the company's shares. Additionally, Rohan suggested that the potential upside for the stock is being ignored, such as the possibility of it being added into the S&P 500, the potential benefit of Instagram, a photo-sharing service it bought last year for $521 million, and new products and advertisements.
THE BIG PICTURE: Facebook went public just over than a year ago in a much-hyped debut, but the stock has not performed well since then.
There are more than 1 billion Facebook users around the world, but some investors are concerned that users are beginning to lose interest. Facebook has also faced criticism for not making its advertising viewable on mobile devices sooner, even though the number of people checking Facebook on smartphones and tablets had been on the rise for some time.
While Facebook is working to address these issues with some success, investors are still leery. Rohan said this could be used as an opportunity to buy.
SHARE ACTION: Shares increased $1.04, or 4.5 percent, to close at $24.33 Monday. Its stock has been volatile over the past 52 weeks, moving between $17.55 and $33.45, and still has yet to return to its IPO debut price of $38 per share.