The Ratings Game: Facebook upgraded on mobile momentum

SAN FRANCISCO (MarketWatch) � Facebook Inc.�s mobile business, once regarded as a weakness, is increasingly being viewed as holding the potential to deliver formidable strength for the social-media giant.

This much was evident as Raymond James analyst Aaron Kessler raised his rating Monday on Facebook to outperform from market perform, citing �expectation for increasing monetization driven by mobile, new ad formats and international.�

/quotes/zigman/9962609/quotes/nls/fb FB 32.47, +0.93, +2.95%

Shares of Facebook, scheduled to report fourth-quarter financial results after the closing bell on Wednesday, traded up 3% to $32.47, after Sterne Agee analyst Arvind Bhatia reaffirmed a buy rating.

Both analysts cited Facebook�s mobile momentum � once referred to as �mobile mojo� by another analyst, after the company reported that 14% of its total ad revenues were now derived from its mobile business.

That was a big deal, since Facebook FB �had been taking heat for not having a clear path to growing its mobile advertising.

That was a factor behind a disappointing initial public offering that became controversial last year. While the company�s stock has recovered of late, Facebook�s shares are still down 15% from its IPO price of $38 a share.

The shares� recent jump � up nearly 50% in the last three months � is mainly due to rising optimism about its ad business, particularly its ability to make money out of its growing base of mobile users.

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Kessler underscored this in his note to clients, saying he now estimates mobile ads to make up about 26% of Facebook�s total ad revenue. For his part, Bhatia said he expects Facebook�s mobile revenue to grow by more than 75% from the previous quarter.

The analyst wrote that Facebook is �well positioned to benefit from two secular trends in advertising � the shift from offline to online advertising and the increasing importance of a social context in online advertising.�

Results from rival Google Inc. also bode well for Facebook, according to Bhatia. Google GOOG last week reported a surge in fourth-quarter profit on strong advertising sales. Read: Google worries fade as results spark rally.

Investors will get a better sense of trends in the online-ad market as Yahoo Inc. YHOO �reports results after Monday�s closing bell. Read: Yahoo�s Mayer beats again; stock jumps.