Wells Fargo's ad checks suggest continued strong growth for Meta Platforms (NASDAQ:META), the bank said in a note Wednesday. They cut their Meta price target to $600 from $609 per share.
Previewing the company's upcoming first-quarter earnings release, Wells Fargo, which has an Overweight rating on the stock, raised its 1Q constant currency ad growth forecast by 100bps, adding that it expects a solid second-quarter guide.
"We view Meta as beneficiary of healthy 1Q eComm environment driven by growing exposure to Shopping/CPG vertical," wrote the firm. However, they note this was partially offset by growing FX headwinds due to a stronger US dollar.
Wells Fargo believes the "market increasingly looking to the next product cycle catalyst (like Reels in '23) to drive future ad growth outperformance vs. industry."
Furthermore, the bank expects Q2 to be the last period of materially above-trend growth at Meta, and they see second-half ad growth tracking more closely with industry trends.
Wells Fargo sees a "sustainable multiple expansion driven by clear engagement and product catalysts to support the next leg of META share growth, as positive revision cycle driven by macro tailwinds moderates."
"We view WhatsApp as an under-appreciated asset [with] sizable potential, should Meta invoke more direct monetization beyond Click-to-Message ads," added the firm. They also see a "limited impact on 1Q results due to recent Meta ad performance degradation that affected some advertisers."