Meta Platforms (NASDAQ:META)
Beginning Friday with a gain of 1% in a mixed market, Meta Platforms (NASDAQ:META) has more than doubled in value over the previous four months.
After reaching a 52-week low of $88.09 on November 4, the Meta stock price has risen by 134%, indicating that investors’ fears of a recession in the advertising business are easing.
Barclays and J.P. Morgan provided Friday’s dose of Wall Street optimism by raising their price targets and issuing positive statements about the future.
Ross Sandler, an analyst at Barclays, cites artificial intelligence as a major reason Meta is his firm’s top pick among mega-cap technology firms.
Although the alpha relative to Google and Amazon.com may have been realized on recent cost reduction, the bull thesis around how generative AI may unlock value has not, he added. Shares have re-rated dramatically over the previous several months.
The press and the investment community have been focused on chatbots like OpenAI’s ChatGPT for the last four months, but “the major unlock is likely to be a Cambrian explosion of material (video, photos, audio, etc.),” similar to what occurred in YouTube’s and Netflix’s early years, when the flood of content led to a significant increase in use and engagement.
He speculated that when the metaverse enters its third act, generative AI may become Meta’s “elusive second act,’” fitting the company’s core business better on mobile and desktop than the expenditures in VR and AR.
He increased the price objective to $270, representing a 32% increase from today. He said earnings per share revisions and multiple expansions should occur over the next 6-8 quarters.
Doug Anmuth, an analyst at J.P. Morgan, raised his price target from $200 to $270 and remained optimistic, citing the company’s improved expenditure and capital spending management as the main reasons for the increase.
Anmuth notes that with the most recent wave of layoffs, Meta will have decreased its workforce by over 25% from third-quarter levels while reducing its spending by 12% (ex-restructuring). Its capital expenditures will increase by 14% in 2023.
Although 2023 may be dubbed the “Year of Efficiency,” Anmuth and the company are confident that Meta is laying the groundwork for sustainable fiscal restraint now. Although if the Meta stock price has increased by a factor of more than two since last November, the “substantial upside ahead driven by faster revenue growth, sustained cost savings, and relatively reasonable valuation” justifies the investment.
Meta stock has been rising this week because TikTok’s CEO was grilled by Lawmakers on Thursday.
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