Facebook is off to a good start this year. The stock jumped by more than 5% on Wednesday to close at $28 a share, pushing the company's market cap back above $60 billion.
Several other big Internet stocks like Google and Yahoo also enjoyed gains on the first day of trading this year thanks to renewed investor confidence following the news that the U.S. Congress had approved legislation to avert the worst of the fiscal cliff.
However, there's more to Facebook's stock surge than general market optimism. After months of downgrades and sell-offs, analysts are gradually learning to like Facebook's business potential again.
Several analysts have put out positive forecasts for the company this week. JP Morgan analyst Doug Anmuth helped boost the stock after he raised his ad revenue estimates for Facebook by 6%-7% on the strength of mobile ads, noting that "marketer feedback on mobile and news feed ads has been very positive." Anmuth raised his target price on the stock to $35 from $29.
Likewise, William Blair analyst Ralph Schackart expressed confidence in the potential of advertising through Facebook Exchange. "Based on our findings, we believe FBX ads are being rapidly adopted by advertisers, and pricing has the potential to increase by three times, although timing of pricing ramp is unknown," he wrote in a report.
Meanwhile, Rory Maher, an analyst with Capstone Investments, reiterated his buy rating on the company, noting the big potential to generate revenue from Russia.
The stock is still a long way from its $38 IPO price and initial market cap of $104 billion, but it's heading in the right direction.