Proactive Investors - Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) shares continued to hover around 11% lower on Thursday after its first-quarter results, but some analysts believe there is some good to be found in the Facebook (NASDAQ:META) owner’s update.
Analysts at Bank of America (NYSE:BAC) believe Meta’s first quarter highlighted several “revenue growth benefits” which included higher legal expense accruals, benefits from a TikTok ban and plans to strengthen its advertising division.
Ad growth is expected to rise by 6% quarter-on-quarter in the upcoming three months thanks to the growth of reels and additional AI improvements, with analysts confident these gains can continue into 2025.
Additionally, the US bank also noted Meta’s ability to benefit from a TikTok ban, with reports earlier this week indicating it could capture up to 60% of US users.
Bank of America maintains its “buy” rating for the stock and targets a US$550 share price, which represents a 25% premium to its current share price.
Despite Bank of America’s rosier view of the Instagram owner, the share price drop makes it clear investors are still concerned.
Largely, these concerns are focused on the group’s plan to hike its spending by 10% despite it being two years until it can monetise its AI offering.
It led to analysts and investors having feelings of déjà vu as they looked back a few years to the group’s plans for the Metaverse, which ultimately failed to transpire into anything of note.
Nevertheless, Bank of America argues this time it could be different.
“What is different on this investment cycle is that AI investments are already driving business results,” analysts said.
It added that Wall Street is already “constructive on the AI opportunity” but did agree that Zuckerberg’s change in tone was “noteworthy.”