Analysts boost outlook for Meta as messaging-ad opportunity grows
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Meta Platforms (NASDAQ:META) was 1% higher along with a generally higher stock market early Thursday as the latest in what has been a string of bullish updates from analysts rolled in.
Evercore ISI's Mark Mahaney reiterated the firm's Outperform rating on Meta after running a deep dive into the company's Click-to-Message ad segment, one he says has been "largely ignored" by investors.
As the main messaging monetization vehicle for Meta currently, CTM ads allow businesses to place ads with an action button opening a direct chat, on Facebook and Instagram feeds (and, as of this week, Facebook Reels).
Those were first introduced in 2015-2016, but the segment has grown to a $10B annual revenue run rate, on track to surpass 10% of total revenues, and with "notable success in emerging markets," Mahaney noted.
"We view CTM as further broadening METAâs marketing portfolio, offering an endemic advertising solution for businesses in developing markets, and perhaps most importantly, allowing META to effectively monetize two of its largest assets -â Facebook Messenger and WhatsApp -â the two largest messaging apps in the world with each having 2B+ users," Mahaney said.
He's reiterated a $305 price target, currently implying 80% upside.
Over at Credit Suisse, analyst Stephen Ju raised his price target to $251 as part of a look-ahead to Meta's first-quarter earnings. He's adjusted that model to account for the latest cost-cutting initiatives. (The company confirmed in mid-March that its "year of efficiency" would move on with yet another 10,000 job cuts.)
"With two rounds of cost cuts already announced and behind us, the investment rationale now hinges on revenue growth outperformance," he says, adding that one reason for optimism has been that the company has essentially replaced lost revenue from Apple's privacy changes with Click-to-Message.
"We believe there is significant room for Meta to ramp revenue for both Messenger/WhatsApp," Ju said, adding that against that backdrop they'd add search revenue ("from a product dev perspective, we believe the most meaningful recent update lies with Instagramâs announcement that it will start to show ads within search results, which we believe should add a new stream of high-margin revenue").
Credit Suisse now expects fiscal 2023 adjusted earnings per share to come in at $14.71 vs. a previous $13.96, and for fiscal 2024 to land at $16.91 vs. a previous $15.36.
Wall Street overall considers Meta a Buy, as do Seeking Alpha authors; Seeking Alpha's Quant Ratings measure Meta Platforms (META) as a Strong Buy.