Analyst unveils new Facebook stock price target after earnings

Here's what could happen next to shares of Meta Platforms.

Feb 4, 2024 - 20:30

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Analyst unveils new Facebook stock price target after earnings

"Hey everyone, thanks for joining us."

And with those words, Meta Platforms (META) - Get Free Report CEO Mark Zuckerberg kicked off the Facebook parent company's fourth-quarter earnings conference call.

Zuckerberg had a quite a story to tell about the social media giant, which also owns Instagram, Threads, and WhatsApp.

He told analysts that 2023 was Meta’s "year of efficiency," which focused on making Meta a stronger technology company "and improving our business to give us the stability to deliver our ambitious long-term vision for AI and the metaverse."

The quarterly results suggest changes last year are already paying off. Revenue grew strongly, engagement with its apps increased, and it launched a slate of new products, including Threads, Ray-Ban Meta smart glasses, and mixed reality in Quest 3. Oh, and, of course, it established itself as an AI leader.

It was a pretty upbeat call, so investors are likely wondering, what's next for its stock.

Mark Zuckerberg, founder and CEO of Facebook/Meta, is seen in attendance during the UFC Fight Night event at UFC APEX on Oct. 1, 2022 in Las Vegas.
Jeff Bottari/Getty Images

Meta Platforms earnings impress

Meta, a member of the "Magnificent Seven," a group of tech stocks that also includes such giants as Apple, Microsoft, and Nvidia, posted adjusted fourth-quarter earnings per share of $5.33 on revenue of $40.1 billion.

Analysts expected adjusted EPS of $4.94 and revenue of $39 billion.

A year ago, Meta reported earnings of $1.76 a share on revenue $32.2 billion, meaning sales grew by 25% and earnings soared 203%.

Capital expenditures were $7.9 billion, driven by investments in servers, data centers and network infrastructure.

Meta also boosted its stock buyback by $50 billion and initiated a quarterly dividend of 50 cents per share for the first time ever.

Analysts boost their price targets

For the current quarter, Meta said it anticipates revenue of between $34.6 billion-$37 billion, surpassing analysts' expectations for revenues to total $33.6 billion.

The timing of these glad tidings was intriguing, given that one day earlier, Zuckerberg and other top social media executives had been blasted by members of a congressional for the child exploitation and harassment that has occurred on their platforms.

The earnings report sent Meta's stock into the stratosphere with shares up nearly 22% to $479 at last check.

And Wall Street analysts enthusiastically boosted their price targets for the company, with several firms increasing their forecasts by $100 or more.

Truist analyst Youssef Squali, for example, raised the firm's price target on Meta Platforms to $525 from $405 and kept a buy rating on the shares.

The company's "stronger" fourth quarter results, increased buyback, and first dividend keep the firm positive on the stock, the analyst tells investors in a research note.

The results reflect accelerating growth in the ads business in the fourth quarter with sustained momentum in the first quarter, as well as higher user engagement, success with Reels and Messaging ads, and growing AI integrations that bode well for FY24 growth, he said.

“We are encouraged by impressive results and guidance as the company continues to see healthy engagement trends and improving monetization,” Wedbush analyst Scott Devitt wrote in a research note

Devitt was so encouraged by Meta's results that he reiterated his outperform rating and boosted the company's stock price target $100 to $520 per share.

“We also highlight a $50 billion increase in the company's share repurchase authorization (bringing the total to about $81 billion) and the announcement of a 50 cent dividend," he said. "Meta remains our top digital advertising pick and we are raising estimates following results."

'Good sign for digital advertising ecosystem'

The analyst noted that Meta has a number of sustainable drivers in place to support growth, including improving monetization of new ad formats and surfaces, with Reels, Facebook’s short-form video-sharing platform, becoming accretive to net revenue and strong growth in click-to-message ad revenues.

Devitt also saw wider implications for Meta's earnings results.

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"Meta's notably strong 1Q guidance is a positive read through for the broader digital advertising industry," he said, "and while we acknowledge that Meta is benefiting from company-specific tailwinds, we think the implication for the health of the digital advertising ecosystem in 2024 is incrementally positive for the entire group, including Pinterest and Alphabet."

Morgan Stanley raised its price target on Meta Platforms to $550 from $375 and kept an overweight rating on the shares after results and guidance were "significantly stronger than expectations."

While Meta's "robust" generative AI pipeline begins to ramp, its solid execution, faster growth, and increased capital structure efficiency with the initiation of a dividend and an additional $50 billion buyback authorization improve the outlook, the firm said.

Wells Fargo analyst Ken Gawrelski raised his price target from $438 to $536, writing that Meta’s exceptional first-quarter guidance and strong fourth-quarter revenue support his constructive view on the digital ad environment.

"We see Meta as an accelerating growth story with emerging upside AI options in messaging, ad tools, and new consumer applications," he said. "Combined with a newfound appetite for efficiency, we believe Meta should be a steady earnings compounder at a reasonable multiple."

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