LightShed gets bullish on Meta Platforms, expecting revenue/profit rebound
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LightShed Partners has launched coverage of Meta Platforms (NASDAQ:META) with a bullish Buy rating, a day ahead of the company's highly anticipated fourth-quarter earnings report.
Meta stock (META) is on the positive side of Communication Services early Tuesday, up 0.8%.
The firm says it's struggling with assigning a value to the company's metaverse investments - but revenues should return to growth in the first half of 2023 and accelerate through the year, as "currency headwinds abate, the economy improves and improved Reels engagement increases the platforms attractiveness to ad buyers," analyst Rich Greenfield said.
"We sat on the sidelines during COVID as the online ad market roared back to life and with it Metaâs stock," he said. "We then watched as it collapsed over the past year as panic built over IDFA/ad-targeting headwinds, competitive pressure from TikTok and most notably undisciplined investment to transform Meta into the metaverseâs operating system."
So why call it a Buy now? Over the past three years, most of what had worried the firm has come to pass, and it believes revenue and earnings growth will "meaningfully outperform" expectations in 2024 and 2025.
Its Buy rating has four key drivers: Engagement with Meta's short-form video product Reels is surging; ad targeting is improving as Meta's Apple-spurred workarounds is bearing fruit; CEO Mark Zuckerberg is exhibiting investor awareness and will "do whatever is possible to win"; and with increasing excitement around VR/AR and mixed reality, "While we have no idea how to even begin valuing the potential of Metaâs investments in mixed reality, we do find it hard to believe it is completely worthless."
The firm has started with a one-year price target of $200, implying 35% upside.
Meta recently expanded a deal with the NBA to offer more than 50 games in virtual reality.