Analysts have never been more confident that further gains are ahead.
By Subrat Patnaik, Bloomberg
15 Nov 2023 07:48
For Meta Platforms bulls, the biggest one-day stock wipeout in history is a fading sight in the rear-view mirror.
The Facebook owner’s shares have nearly quadrupled since a low in November last year, which came after a $251 billion crash in February. By one measure, analysts have never been more confident that further gains are ahead.
CONTINUE READING BELOW
Of the 70 analysts tracked by Bloomberg that cover the social media giant, 62 have buy-equivalent ratings on the stock. That’s the highest number since the firm’s initial public offering in 2012.
“We don’t think you have to be a believer in the metaverse story to like the stock,” Stifel Nicolaus analyst Mark Kelley wrote in a note on Tuesday.
Kelley, who is one of the many analysts with a buy rating, says the investment thesis is backed by advertisers pointing to the company’s unmatched scale relative to competitors, including TikTok.
The overwhelming bullishness shows how far the social media giant has come in regaining investor support since last year’s crash.
Back then, Wall Street had soured on the shares as the company’s sales contracted and its Chief Executive Officer, Mark Zuckerberg, embarked on a multibillion-dollar project to build his version of the metaverse — an immersive virtual world. Now, a focus on cost cutting, toned down metaverse rhetoric and resurgent revenue growth have helped allay most skepticism.
Analyst projections for Meta’s profitability continue to rise. Wall Street now anticipates the company will generate about $18 a share in earnings next year, up from expectations of about $10 a year ago, according to data compiled by Bloomberg.
Not that all are convinced Meta is on the right track. Needham & Co’s Laura Martin is one of only two analysts with sell ratings on the stock. She believes the company’s core business is at risk from rising competition and potential changes to mobile operating systems like Apple’s iOS that could hurt Meta’s ability to target users with ads.
“TikTok is eating them alive,” she said in an interview. “Facebook doesn’t control its distribution or content. I don’t know how you can have a competitive advantage.”
Nancy Tengler, chief executive of Laffer Tengler Investments, is cautious on the stock and sees limited upside potential.
CONTINUE READING BELOW
“I haven’t really been thrilled with the leadership, even though the stock price has delivered and they cut costs,” she said in an interview on Bloomberg Television. “You can only do that for so long.”
Still, while the stock’s valuation has risen this year, at about 18 times earnings projected over the next 12 months, Meta is the cheapest among the seven biggest technology and internet stocks and trades at a discount to both the Nasdaq 100 and S&P 500 indexes.
Sylvia Jablonski, co-founder and chief investment officer at exchange-traded funds firm Defiance ETFs, is betting that Meta’s priorities are now in the right place and that the company is poised to benefit from artificial intelligence and growth in digital-ad spending in coming years.
“I’m interested in picking up shares for a long time horizon as the decade of machine learning, AI and all things digital growth continues to take shape,” Jablonski said.
Tech chart of the day
Two dot-com era darlings have seen diverging fortunes. While Microsoft Corp has grown more than six-fold from its dot-com highs, Cisco Systems Inc. has yet to recover since its historic crash in the turn of the century. The computer networking equipment maker’s stock is still trading about 36% below its all-time high set in March 2000. Both stocks were rising along with fellow technology stocks on Tuesday following the latest data on inflation.
© 2023 Bloomberg