Meta Platforms (NASDAQ:META) shares are trading almost 2% higher in pre-open Thursday after TD Cowen analysts upgraded to Outperform from Market Perform with a price target of $345 per share (up from the prior $220).
The analysts took note of recent share gains and expect this trend to continue, fueled by four key drivers: 1) consensus estimates are too low; 2) Reels engagement is positive; 3) Threads monetization optionality; and 4) Potential for more cost cuts.
“In retrospect, we underestimated Meta’s willingness to significantly cut costs after providing initial ’23 opex and capex guide at 3Q22 earnings that was well above street expectations. Shortly after setting guide, Meta mgmt. did a complete 180 by instituting headcount cuts and other cost initiatives as part of what they deemed the year of efficiency,” analysts said in a client note.
Analysts expect Street consensus estimates to increase as they raised revenue and EPS estimates by 8% and 7%, respectively, annually on average over the next 5 years.
TD Cowen’s Q2 Social Survey data showed “modest y/y engagement improvement at Instagram and Core Facebook,” analysts further noted.
“Respondents once again indicated rising usage of IG Reels, suggesting that Reels could be a driver of incremental time spent on Instagram. In addition, our 2Q23 Digital ad check was positive for META, and suggested further monetization of Reels via image-based overlay ads that launched on IG at the end of 2Q,” analysts concluded.
Several major research firms, including Piper Sandler, Bank of America, and Morgan Stanley, upgraded META shares earlier this year.