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Facebook stock hits high; proves it can sell ads on mobile app

(FILES) A view of and Apple iPhone displaying the Facebook app's splash screen in front of the login page in this May 10, 2012 file photo in Washingto...
Facebook shares surged after the social network company's quarterly revenue beat expectations and showed it could sell ad space on mobile app.KAREN BLEIER / AFP - Getty Images

Facebook shares surged over 16 percent to an all-time high on Thursday after the company's resounding revenue growth underscored CEO Mark Zuckerberg's success in selling ad space on the social network's mobile app.

At least 30 brokerages raised their price targets on Facebook's shares, which touched a high of $62.30 in early trading on Thursday. If the gains hold to close, Facebook would have added about $20 billion to its market capitalization of $136 billion.

The results come after a sometimes shaky 18 months for the company after its Initial Public Offering on May 18, 2012, when shares went on sale for $38.00 in one of the biggest IPO's in Internet history.

However, the IPO was marred by trading glitches at the Nasdaq exchange which resulted in several lawsuits. The share price slid to $20 by August 2012 and last June Facebook was at a low of $22.67.

Analysts noted that the company, which says it now has 1.23 billion monthly users, needed to get more advertising revenue from mobile devices, which its latest results demonstrate it can do.

Facebook's fourth-quarter revenue rose to $2.585 billion from $1.585 billion in the year-ago period, handily beating analysts' average expectation of $2.33 billion. Facebook said revenue from mobile ads represented 53 percent of its total fourth-quarter advertising revenue, up from 49 percent in the third quarter.

Facebook and rival Google have been looking for ways to generate more revenue by harnessing the mobile platform, as more and more users rely on smartphones to access the Internet.

Deutsche Bank estimated 4 billion people would be accessing the Internet on smartphones in 2017, with spending on global mobile advertisement set to reach $70 billion by the same year.

Analysts identified the company's new photo-sharing service, Instagram, as well as a new video ad format and its social search feature, dubbed as graph search, as the next big areas of growth for Facebook.

Facebook launched its first ads for Instagram during the quarter just ended, and has also started testing video ads with brand marketers.

Wall Street has been counting on video ads to open up a potentially lucrative market as Facebook tries to sustain its rapid growth. This market is considered crucial for Facebook's market valuation, and poses a potential long-term threat to traditional TV networks.

One area of concern to Facebook has been that teenage users might be drifting to new messaging services, such as Snapchat and WhatsApp.

After spooking some investors in October by saying it had noticed a decrease in daily users among younger teens, Facebook did not disclose teen usage data for the fourth quarter.