Mike Isaac

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Haters Gonna Hate, but Facebook Is Still a Buy, Analyst Says

Ever since its disappointing Nasdaq debut last month, Facebook can’t seem to catch a break. Its shares tumbled from day one into the following weeks, and analysts and investors the world around have called into question Facebook’s potential for long-term monetization.

At least one market research firm isn’t concerned with the hubbub. Nomura Equities Research initiated coverage of Facebook with a “buy” rating on Thursday, setting a target price of $40.

Why the optimism? Well, despite Facebook’s ongoing struggles with proving itself a viable long-term business, Nomura analyst Brian Nowak makes one very salient point: Facebook’s reach extends to more than half of the online world. To boot, Facebook display ads make up about 8 percent of the global advertising market, up from 2.5 percent three years previous.

To be sure, not everyone is convinced that share of display advertising is entirely effective. From media luminaries like Sir Martin Sorrell to auto industry giant General Motors, many are pooh-poohing Facebook’s capacity to make money in the advertising industry, citing poor returns and even worse targeting relevancy.

But Facebook’s ace in the hole is what Nowak and his colleagues are betting on: The company’s deep treasure trove of user data. Its potential, combined with Facebook’s massive reach and the company’s position as the largest single online display advertiser, are what make Facebook a long-term bet for Nomura.

And hey, things are looking up recently. After spending weeks in the low- to mid-20s, Facebook shares were on the rise this week moving well into the mid-30s, closing up at 31.84 on Thursday at the close of business.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik