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Facebook hits new all-time high as Wall Street gushes over social juggernaut's ad pricing power

  • Facebook's ad pricing grew 24 percent year over year in the second quarter versus 14 percent in the first quarter and 3 percent in the fourth quarter of 2016.
  • The company's shares have been one of the best-performing large-cap names in the market.
  • Its shares rallied 44 percent year to date through Wednesday versus the S&P 500's 11 percent return.

Mark Zuckerberg, chief executive officer and founder of Facebook
David Paul Morris | Bloomberg | Getty Images
Mark Zuckerberg, chief executive officer and founder of Facebook

Wall Street is buzzing over Facebook's surging ad pricing growth. Analysts are stunned the social media giant is able to charge so much more for its inventory.

Facebook shares opened up 5.5 percent Thursday morning to a new all-time high.

"Shares are reacting positively to a strong pricing reflex that suggests the key pricing-driven 2H bull case is realistic," Piper Jaffray analyst Samuel Kemp wrote Wednesday.

The internet company reported better-than-expected second-quarter earnings Wednesday. Its ad pricing grew 24 percent year over year versus 14 percent in the first quarter and 3 percent in the fourth quarter of 2016.

Kemp reaffirmed his overweight rating and raised his price target for Facebook to $195 from $170, representing 18 percent upside from Wednesday's close.

Facebook has been one of the best-performing large-cap stocks in the market. Its shares rallied 44 percent year to date through Wednesday versus the S&P 500's 11 percent return.

Goldman Sachs explained why Facebook was able to raise its prices.

The strong pricing was "driven by the ongoing shift towards mobile, increasing adoption of video, as well as Instagram," Goldman Sachs analyst Heather Bellini wrote Thursday. Facebook "continues to be well-positioned in one of the best secular markets … we continue to see opportunities for incremental ad load on Instagram, increased engagement from Instagram stories, and (while early) potential for new monetization levers through Messenger and Whatsapp."

Bellini reiterated her buy rating and raised her price target for Facebook to $205 from $180.

One Wall Street analyst also predicted Facebook's pricing power will continue to rise going forward.

"We believe Facebook's transition to video-centricity is helping drive incremental demand that can sustain pricing growth for the foreseeable future," KeyBanc Capital Markets' Andy Hargreaves wrote Wednesday. "Further, we see significant opportunities to drive upside to estimates through long-form video and monetization of Facebook's billion-user messaging platforms."

Andy Hargreaves maintained his overweight rating and raised his price target for the internet company to $200 from $155.

— CNBC's Michael Bloom contributed to this story.