Meta gains as Loop upgrades to Buy, seeing bright turn in revenues
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Meta Platforms stock (NASDAQ:META) was 2% higher Monday morning even as major Communications peers were lower, following an upgrade to Buy at Loop Capital, "increasingly positive" on revenues.
Analysts Rob Sanderson and Alan Gould see a bright revenue picture ahead even as Meta stock has seen an "outstanding" re-rate this year, up 94% year-to-date against the broader market's gains of 8%.
"Three significant headwinds to revenue (Apple ad tracking changes, foreign exchange and transition to Reels) are all cycling through and set to become tailwinds," the analysts said. Put together, those pressures had added up to a mid-teens percentage headwind to revenue growth last year, they said.
And much of the stock's revaluation has come from earnings revisions tied to the company's aggressive approach to expenses: Consensus earnings per share for 2024 is 44% higher since the end of January, with just a 3% revision to revenues.
Aside from the vanishing of $15B in revenue headwinds from last year, "Meta's product story is as good as it's been in some time," the analysts note -- with enthusiasm for Advantage+ "for good reason," and a number of other ad-tech improvements helping reverse the headwind from Apple's iOS privacy changes.
Meanwhile, the firm is more bullish on the impact from Meta's short-form video product Reels to monetization.
"Competition from TikTok (BDNCE) has been a major focus, but Meta has proven over and again to be a great fast-follower, its platforms serve over 3B unique users and Meta has best-in-class infrastructure and adtech. Feedback from brand advertisers on Reels performance is increasingly positive and advertising products continue to evolve quickly," they said.
Loop has a price target of $320, now implying 34% upside.
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