Two Analysts See Facebook Shares Going to $36 or $37

Argus raised its rating to Buy from Hold and assigned a $36 price target based on three assumptions. The independent research firm said that this is a favorable entry point but also cautions investors that this stock is likely to be volatile and subject to sudden momentum swings. The first positive is a huge installed customer base of more than a billion users. Its second benefit is that it is unquestionably the social networking brand of choice for the masses, and management understands that mobile is critical to its future. The third benefit is that management understands the importance of monetization, even if it seems to put the user experience first, with gains seen in new forms of ads and the Facebook Advertising Exchange. Argus even notes that management has warned that its growth project investments will pressure margins this year and will take some time to contribute in a serious way to revenues.

Argus also called Facebook Home a completely redesigned way for its users to interact with Facebook through mobile devices. It also sees it as a way for the company to strengthen its presence in mobile computing without getting into hardware nor getting into an operating system. Argus raised its 2013 earnings per share target to $0.48 from $0.45 and raised the 2014 estimate to $0.67 from $0.55.

Sterne Agee’s analyst Arvind Bhatia also reiterated his Buy rating, but he has a $37 price target on shares of Facebook. He said:

While adoption rates for this are hard to predict, Home looks promising and has the potential to boost Facebook’s user engagement and ultimately monetization on mobile. Separately, earlier this week, market research firm eMarketer predicted that 30% of all mobile ad dollars in the U.S. in 2013 will go to Facebook and that is a more bullish projection than our current model suggests.

He also noted that the new Facebook app feels more like an operating system than an application.

Facebook shares are up 1.1% at $27.37 ,and the consensus analyst price target from Thomson Reuters is $33.44. If you split the difference between these two bullish calls, Facebook has about 35% upside from Thursday’s closing price.