Facebook is not even public yet and we already have two analysts who have issued “Buy” ratings.  On Friday came news that Wedbush Morgan was becoming the first firm to formally initiate Facebook coverage.  Then on Monday came news that Stern Agee also initiated coverage with a Buy rating.

Wedbush Morgan’s Buy rating came with a price target of $44.00 per share.  That is above the $28 to $35 initial price range of Facebook.  The firm’s Michael Pachter said that Facebook warrants a premium multiple due to growth in advertising, mobile, and payments.  The firm’s $44 target is based upon 22-times its projected 2015 earnings of $2.00 EPS and it sees earnings of $0.50 EPS in 2012 and $0.65 EPS in 2013.

The new report today is even more ambitious as Stern Agee initiated coverage on this one with a “Buy” rating and with an even more optimistic price target of $46.00 per share.  Stern Agee is setting forward earnings estimates of $0.56 EPS for 2012 and $0.69 EPS for 2013.

We do have some cautions, but they are beyond a drop in sequential revenues last quarter. Our concerns include worries over how a low-float is going to put an even larger premium out there.  There is also the issue that the board of directors do not have as much say here, there is a young CEO who often looks at services for customer reward more than how Facebook can monetize that effort.  The common shareholders will also have effectively no say at all and this is being considered a closely held entity by many investors.  The most recent filing shows that Zuckerberg will have about 58.8% of the total share votes between ownership and proxy.

Anyhow, there are now already two analysts calling for investors to buy shares at the IPO with a price target range of $44 to $46 per share.

Here are a few vehicles which already own Facebook shares or are tied to Facebook, but keep in mind these have all been known for a while:

Zynga, Inc. (NASDAQ: ZNGA) is viewed as a key secondary beneficiary of the Facebook move because so much of Facebook’s revenues are tied to the social gaming company.

Microsoft Corporation (NASDAQ: MSFT) will have a large gain in its holdings of some 32,784,626 Facebook Class B shares but that company is far too large to view as a true direct beneficiary based solely upon the valuation bump-up from the Facebook value.

GSV Capital Corporation (NASDAQ: GSVC) claims direct ownership of Facebook shares that it has bought through private-public exchanges.

Another ‘Facebook Winner’ is the lesser-known Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC) with its Facebook shares: as of Monday the firm claims to have an investment of 600,000 shares of Facebook’s Class B common stock.

Global X Social Media Index ETF (NASDAQ: SOCL) most likely does not yet own Facebook shares in the ETF holdings but as soon as Facebook comes public this ETF will be forced to begin adding Facebook shares as it gets added into the public social networking index yet.  This would be a bet that Facebook will lift the tide of all social networking stocks.  This ETF did spike after it became known that Facebook was filing its IPO paperwork.

If you are going to be watching the media reports following the IPO roadshow for Facebook, you can probably assume that it is all going to be how the investors interpret and react to Mark Zuckerberg’s leadership.

JON C. OGG

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