Analysts unveil new Meta Platforms stock price targets ahead of earnings

This is what could happen to Facebook-parent Meta Platforms shares next.

Jan 30, 2024 - 08:30

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Analysts unveil new Meta Platforms stock price targets ahead of earnings

Meta Platforms (META) - Get Free Report shares closed at an all-time high in active trading Monday, adding more than $240 billion to the social media giant's three-month surge, as investors looked to a major AI investment drive from Chief Executive Mark Zuckerberg to power its 2024 profit.

Meta, which is scheduled to post fourth-quarter earnings after the close of trading on Thursday, remains the world's second-largest digital-ad company, trailing only Google parent Alphabet (GOOGL) - Get Free Report and generating around $131 billion in 2023 sales.

Its larger rival's push into artificial intelligence, however, as well as big changes in the way it can offer targeted ads to users of its Family of Apps, including Facebook and Instagram, are forcing Zuckerberg to cast aside his metaverse ambitions and ramp up spending in new AI technologies.

The AI drive will enable Meta to offset the impact of changes demanded by competition authorities in Europe. Users there can now pay for ad-free versions of Meta's two biggest social-media platforms linked to a specific account. And recent changes from Apple (AAPL) - Get Free Report prevent tracking user activity on non-Meta apps and websites.

Meta last year was fined €390 million ($421 million) by officials in Ireland over its targeted ad policies and has remained in the crosshairs of European regulators over its user privacy terms.

Meta CEO Mark Zuckerberg has shifted focus from his 'metaverse' ambitions to a full-on drive into AI technologies.
Meta

"In our view, this may potentially lead to a decline in [cost per thousand impressions] as advertisers face some degree of signal loss through reduced targeting capabilities," said KeyBanc Capital Markets analyst Justin Patterson. "However, we expect changes to be less impactful than what occurred during Apple's platform changes in 2021."

As part of its effort to mitigate the impact of those big ad changes, Meta founder Zuckerberg this month told investors, via a short video form called a Reel on Meta's Instagram app, that the company would have around 350,000 H100 graphics-processing units, the AI-focused chips made by Nvidia (NVDA) - Get Free Report, in place by year's end.

Meta is an AI giant and is getting bigger

All told, Zuckerberg said, Meta will have around 600,000 GPUs up and running. The total would establish one of the largest AI systems in the world, as the company consolidates its AI-research team more closely to its business unit.

Meta told investors in October that while it's trimming its near-term capital-spending plans, it's also looking to grow head count significantly next year. It forecast overall capital spending in the region of $94 billion to $99 billion for 2024.

That drive, Loop Capital analyst Rob Sanderson argues, may not generate a significant bump in Meta's overall revenue this year, but it could have "meaningful implications" for the stock.

Sanderson boosted his price target by $65 to $375 per share ahead of Thursday's after-hours earnings.

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Wall Street analysts see Meta posting a bottom line of $4.95 per share, a threefold improvement from fourth-quarter 2022, with revenue rising around 21% to $39.14 billion.

Meta, for its part, told investors in October that it estimated revenue in the region of $36.5 billion to $40 billion. But it noted that the current conflict in the Middle East, as well as weakening growth prospects in major economies around the world, could affect that outlook.

Jefferies analyst Brent Thill, however, said his team has noted "the most positive digital ad checks we've seen in several years" and expects revenue to come in at the high end of Wall Street guidance.

Meta Platforms: Reeling in the dollars

Thill also improved his price target on Meta, adding $30 to take it to $455 per share. He argued that the stock's price-to-earnings multiple of 34 times provides good value against its Magnificent 7 peers even in the wake of its near tripling over the whole of 2023.

Wedbush analyst Scott Devitt is also bullish on Meta's ad-sales potential, citing both the success of the Reels rollout and a resilient ad-spending market.

"We think Reels continues to capture incremental share of overall advertiser budgets with 79% of Reels advertisers in our digital advertising survey reporting an increase in their Reels spending during 4Q, with 34% reporting a significant increase," Devitt said

"Reels is now net neutral to Meta’s consolidated advertising revenue and continued monetization improvements should be a modest tailwind to revenue growth in 2024," he added.

Meta Platforms shares ended 1.75% higher on the session to close at a record high $401.02 each Monday, extending its 2024 gain to around 15.8% and valuing the Menlo Park, California-based tech group at just over $1.03 trillion.

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