Proactive Investors - Meta Platforms Inc (NASDAQ:META) Inc (NASDAQ:FB) is expected to follow up on a strong 2023 with growth driven by the ramp of Reel monetization and its expanding artificial intelligence (AI) capabilities, analysts at the Bank of America (NYSE:BAC) (BoA) believe.
The Facebook (NASDAQ:META), Instagram and WhatsApp parent gained 194% in 2023 and outperformed the Nasdaq, which gained 43%, driven by revenue upside, cost discipline and optimism about its AI offering.
“With a favorable macro backdrop for advertising, Reels contribution turning positive in 2024, a large messaging revenue ramp in progress, strong AI assets driving results, and still plenty of costs to cut if needed, we remain constructive on the stock,” the analysts wrote in a note to clients.
They expect the fourth quarter of 2023 to have been Meta’s peak revenue growth but believe that the stock can overcome revenue deceleration during 2024.
“Bulls suggest 2024 revenue will beat estimates and deceleration is expected/priced in the multiple, while bears may prefer perceived acceleration stocks with easier comparisons, including Pinterest (NYSE:PINS) and Snapchat,” the BoA analysts wrote.
“We think Meta is in a solid position with Instagram growth leading the sector and see the Reels/Messaging/AI ad revenue cycle as still early given ad checks.”
Other risks to the stock include the introduction of “commodity” Reels content lowering the value of Meta’s social networks, changes from Google (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) around advertising targeting, regulatory headwinds, growing losses from its Metaverse investments, and slowing advertising spending from Chinese eCommerce advertisers amid new competition.
They reiterated their ‘Buy’ rating on the stock and US$425 price target.
Shares of Meta traded hands at about US$392 in the early afternoon on Thursday.