What happened
Shares of Meta Platforms (META 3.77%) were climbing on Tuesday, up about 3% as of 1:20 p.m. ET.
Meta continues to climb higher, despite already being up 131% on the year, as the stock appears to now be recovering from its multiyear sell-off, which culminated last fall. That's thanks to both a recovering advertising market, Meta's ability to use artificial intelligence (AI) to regain engagement and ad targeting capabilities, and a pullback on its massive metaverse spending that was concerning investors.
On Tuesday, the social media juggernaut got even better news, as a Wall Street firm raised its price target on its shares.
NASDAQ: META
Key Data Points
So what
On Tuesday, Citi analyst Ronald Josey, who already had a buy rating on Meta shares, raised the stock's price target from $315 to $360. That compares with today's share price around $287, and would mark a tripling of the share price since the beginning of the year, as well as a ridiculous quadrupling of shares since their October lows.
In his note, Josey observed that although Instagram is still in many ways behind TikTok in terms of downloads and time spent on the platform, Instagram continues to gain market share, with higher relative growth in monthly active users (MAUs) and engagement.
Delving into specifics, Josey notes that while Instagram downloads were 12% below TikTok's this quarter, Instagram grew monthly active users by 6%, as opposed to TikTok's 4% gain. Furthermore, while users continue to spend more time on TikTok, Instagram's growth in time spent per MAU continued to outpace TikTok's for a seventh consecutive month.
Finally, Josey also noted increased engagement and ad loads for the new Reels product, which Meta has been aggressively promoting as a competitor to TikTok's short-form videos. Josey also sees advertising revenue recovering in 2024 with a 14% growth rate.
Now what
Meta is a very interesting company to watch right now. Management has done an excellent job of investing in AI and short-form video to fend off TikTok, which has proven to be a formidable competitor over the last few years.
In addition, as the world's largest social media platform, Meta has incredible amounts of in-house data, which will only become more valuable as artificial intelligence allows it to use data to become more efficient, boost revenue, and find new product opportunities.
On the other hand, Meta is still spending a huge amount of money on the metaverse, and the payoff from those investments is highly uncertain.
At around 20 times 2024 earnings estimates, Meta certainly isn't as cheap as it once was. Still, if it can continue to make headway in short-form video and return its massive ad platform to growth, there is certainly a path toward Josey's price target. And if new initiatives around WhatsApp or the metaverse begin to bear more fruit, shares could even go higher.
