Analysts praise Meta Platforms’ focus on efficiency, say stock is moving from ‘niche to pedestal’
Meta Platforms is focused on efficiency, and analysts seem to like the narrative change from the beaten tech giant. Shares jumped more than 19% in premarket Thursday trading. On Wednesday, Meta beat fourth-quarter revenue estimates and announced a $40 billion share buyback program, and CEO Mark Zuckerberg said the company was focused on efficiency. “Our community continues to grow and I’m thrilled with the strong engagement in our apps,” Zuckerberg said in a statement Wednesday. “Our management theme for 2023 is ‘the year of efficiency’ and we are focused on becoming a stronger and more agile organisation.” JPMorgan’s Doug Anmuth reiterated his overweight rating, saying in a note Thursday that the focus on cost cuts should improve earnings power and benefit the stock in the short and long term. “Importantly, we expect this newly discovered discipline to drive a stronger, more agile organization over the long term, not just for the next 12 months,” he wrote. Shares of META YTD Mountain Meta Platforms have already jumped 27% this year. Analysts also appeared to welcome the company’s decision to cut its outlook for capital expenditures and operating expenses. Jefferies analyst Brent Thill said in a note Wednesday that this should lead to higher earnings per share in 2023 and align with the company’s track record of rising both. “Usage, engagement and revenue are all increasing, while costs and capital expenditures are falling, a recipe for even more upside,” Barclays’ Ross Sandler wrote in a note to clients on Wednesday, noting that 2023 could be the year the company goes from “niche to pedestal.” The results even warranted an upgrade to buy from Bank of America. Analyst Justin Post also raised his price target on the stock to $220 from $160. The new price target implies a 43.7% upside from Wednesday’s close. “We see three drivers that could lead to continued multiple expansion for the stock: 1) With the new efficiency mindset, the stock is now positioned for leverage/EPS as the advertising environment improves, 2) The competitive environment is improving with the growing use of Reels and TikTok’s daily active users are slowing down, and 3) data on call (20% improvement in ad conversion) suggests that Meta could become a game on several years [artificial intelligence/machine learning] improvement cycle following outsized capex/GPU investments in 22/23,” Post said. for the first time since 2021, as the company focuses on efficiency. The word “efficiency” came up more than 25 times on the company’s earnings call, according to Morgan Stanley’s Brian Nowak. The shift in focus, he added, could put pressure on rivals such as Alphabet and Amazon to improve their sustainability. Meta shares are already up 27% year-to-date, and while the social media giant is “far from out of the macro lumber,” cost cuts are creating the “EPS slingshot opportunity” investors have been waiting for, Evercore ISI’s Mark Mahaney said. The analyst has an outperform rating on Meta and has raised his price target to $275, implying an almost 80% upside. Analysts of a’s “App Family” are also increasingly confident in the company’s Reels business and in-game metaverse. Goldman Sachs’ Eric Sheridan reiterated his buy rating on Meta, saying shares should continue their rally as the company “builds a rising revenue narrative” around its so-called “App Family.” The company’s audience across apps should position it well as consumer habits evolve into augmented reality, messaging, short video and more, he wrote. Morgan Stanley’s Nowak hailed the company’s continued progress in monetizing and improving engagement on its Reels product, with plays more than doubling on Facebook and Instagram in the past year, and growing even faster sharing. The global advertising environment faces challenges, and the company continues to battle headwinds from Apple’s privacy changes. The industry, however, sees some bright spots in the coming months. “That said, advertiser adoption of new tools (such as CAPI) continues to grow, investments in AI are improving measurement and targeting, and new formats such as click-to-message ads and Shop ads move conversions across the platform,” JMP wrote. Andrew Boon. Meanwhile, analysts are expecting losses for the company’s Reality Labs division, which posted another quarterly operating loss for the company, bringing its total for 2022 to $13.7 billion. Guggenheim’s Michael Morris said in a note Wednesday that the strength and performance boost within Meta’s “family of apps” is helping improve investor tolerance for its metaverse game. Stifel’s Mark Kelley said: “We don’t think you have to believe in the metaverse story to like the stock – we think the increased transparency around Facebook Reality Labs is a positive, but we don’t think so. more than the original goal of reaching 1 billion metaverse users is overstated.” – CNBC’s Michael Bloom contributed reporting.
Analysts praise Meta Platforms’ focus on efficiency, say stock is moving from ‘niche to pedestal’
