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If Facebook Stock Tops $38, It Could Be Off to the Races

Facebook (FB) tested new highs Tuesday, hitting $37.96 intraday — just pennies away from the $38 price tag the social media giant debuted at in May 2012 amid a controversial IPO.

The latest impetus was a blog post that announced a pilot program called Facebook Mobile Games Publishing, an effort to plug in smaller game developers directly into FB — in exchange for a cut of the revenue those games generate, of course.

It’s an innovative plan — and one that is sure to be higher-margin and more sustainable than the current troublesome partnership with FarmVille creator Zynga (ZNGA).

And if Facebook stock pushes higher than $38 in the next week, it could be off to the races as this battered tech company wins back Wall Street.

Facebook stock has rallied strongly on the heels of Facebook earnings that showed big growth in mobile users and strong top-line performance. In the past year, the company has made big strides to look beyond its current model, including the billion-dollar buyout of Instagram, its Facebook Home smartphone OS and Graph Search, among other things.

There’s also an effort afoot to bring Facebook and its universe of ads to “dumbphones” in emerging markets and exponentially increase the potential of users. Of course, it’s slick to use a Facebook app on Apple (AAPL) iPhones or Google (GOOG) Android-powered devices, but many regions are not as wired or as wealthy, so providing accessibility on lower-end phones could dramatically increase the Facebook universe.

I’ll admit that I was a Facebook hater for a long time, but earnings and mobile growth have made me a believer. This company is legit, and if FB stock crosses above $38 a share, that could be an important psychological floor for traders.

Yes, advertising in mobile has lower margins and big sites like Yahoo (YHOO) and AOL (AOL) property Huffington Post continue to see troubles in this deflationary ad environment. It’s also worth noting that a forward price-to-earnings ratio of around 40 is a heck of a premium for a company like this.

But don’t let an admittedly troublesome IPO and negativity on Wall Street convince you that Facebook is done for. The stock is already at a new 52-week high and more than double where it was trading last summer.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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