Meta Platforms builds on four-month run as Barclays, J.P. Morgan praise upside
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Meta Platforms stock (NASDAQ:META) was up 1% early Friday in a mixed market, continuing a climb that has seen it more than double in just the past four months.
The stock's up 134% in fact since hitting a 52-week low of $88.09 on Nov. 4, suggesting that some heavy worries about an ad-industry recession are starting to straighten out.
Friday's dose of daily Street bullishness comes from Barclays and J.P. Morgan, each of which boosted their price target alongside upbeat commentary on the upside ahead.
Barclays analyst Ross Sandler calls Meta the bank's preferred name in mega-cap technology stocks, pointing to artificial intelligence as a key.
"Shares have re-rated significantly in the past few months and while we think the alpha vs. Google (GOOG) (GOOGL) and Amazon.com (AMZN) may have been realized on recent cost cuts, the bull case around how generative AI could unlock value has not," he said.
Chatbots like OpenAI's ChatGPT have taken up the attention from the press and the investment community in the past four months, but "the big unlock is likely to be a Cambrian explosion of content (video, images, audio, etc.), analogous to what happened in the early years of YouTube or Netflix, where this inundation of content led to massive uptick in usage and engagement."
Generative AI fits Meta's core business better on mobile and desktop than do the investments in virtual reality and augmented reality, he said, and could end up as the company's "elusive 'second act'" as the metaverse shifts into the third act.
There should be a "double whammy" of earnings per share revisions and multiple expansions for the next 6-8 quarters, he said, boosting the price target to $270, implying 32% upside from here.
J.P. Morgan analyst Doug Anmuth also boosted the price target to $270, reiterating the bullishness from his December upgrade to Overweight, which was based largely on some new discipline around expenses and capital spending.
Now the company's latest round of job cuts means that Meta will have reduced headcount almost 25% from third-quarter levels, and cut 2023 expenses 12% (ex-restructuring) and capex by 14%, Anmuth points out.
"Importantly, 2023 may be the 'Year of Efficiency,' but we believe Meta is building the critical muscle for financial discipline over the long term," Anmuth said. Despite the stock more than doubling from November, there's "meaningful upside ahead driven by accelerating revenue growth, continued cost efficiencies, and still attractive valuation."
Also driving Meta stock this week is the hot and growing scrutiny on key rival TikTok, whose CEO faced a grilling in Congress Thursday.