“Analysts Raise Price Targets for Meta Platforms Inc (META) Ahead of 2Q23 Earnings”
- Shams Ul Zoha
- July 18, 2023
- 5:18 pm
WHAT YOU SHOULD KNOW
- JMP Securities, Goldman Sachs, and Credit Suisse analysts maintain positive outlooks on Meta Platforms Inc (META) and raise their price targets.
- Reels and improved recommendation algorithms are boosting user engagement, while Advantage+ is gaining adoption for ads.
- Investors are eagerly awaiting Meta’s 2Q23 earnings report, scheduled for July 26.
JMP Securities analyst Andrew Boone has maintained a positive outlook on Meta Platforms Inc (META) and raised the price target from $300 to $350. Ahead of Meta’s 2Q23 earnings release, Boone increased his estimates, citing strong engagement trends, improved ad performance driven by AI, and a stable advertising environment in the second quarter. Boone believes that Meta is at the early stages of benefiting from various product catalysts, including Reels, AI, and cost discipline. With Reels and enhanced recommendation algorithms driving increased user engagement, Boone expects Facebook and Instagram to continue capturing user time. He also notes the growing adoption of Advantage+ for ads and the positive impact of AI on targeting and attribution. Boone’s increased estimates are considered conservative, with a belief that Meta’s shares have the potential to rise further.
Goldman Sachs analyst Eric Sheridan reaffirmed a Buy rating on Meta and raised the price target from $300 to $335, while Credit Suisse analyst Stephen Ju maintained an Outperform rating and increased the price target from $277 to $361. Both analysts previewed Meta’s 2Q23 results, recalibrating their estimates and factoring in changes to the capital structure. For Meta’s FY23 and FY24 adjusted EPS, Sheridan’s estimates are $18.40 and $20.97, respectively, compared to the previous figures of $18.28 and $19.26. Ju’s GAAP EPS estimates stand at $11.79 and $14.67, revised from $11.63 and $13.31. The analysts anticipate revenue growth for Meta from 2020 to 2023 to be non-linear. They expect core Facebook and Instagram to contribute around $10 billion of the anticipated $12.7 billion revenue growth in 2024, while the remaining amount is expected to come from monetization in WhatsApp, Messenger, and Reels. Both analysts see potential for significant growth driven by these platforms in the future.
In the near term, Ju’s discussions with advertisers indicate accelerating budget growth as the drop-offs experienced in May last year are being surpassed. Advantage+ continues to help advertisers overcome signal loss, contributing to the recapture of market share for Instagram and the core Facebook app. Ju’s FX-neutral ad revenue growth rate for 2Q23 reflects 12.7%, with an expectation of ongoing acceleration into 3Q23. The positive rating and price target revisions reflect the potential for Meta to achieve positive operating margins and experience inflection in free cash flow growth starting in the third quarter of 2023. Additionally, the increased monetization of Instagram and other properties, along with the potential for more efficient investments in Reality Labs, are seen as factors that could drive better-than-expected ad revenue growth.
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