Wall Street analysts become even more bullish on Meta after its latest earnings report

Published Thu, Jul 27 20236:40 AM EDTUpdated Thu, Jul 27 202311:24 AM EDT

Meta has had a breakout year in 2023, and Wall Street analysts think the stock has even further room to grow after the company's latest quarterly report. The social media company reported earnings per share and revenue for the second quarter that beat analyst expectations , boosted by a rebound in ad revenue. Meta also issued optimistic third-quarter guidance. Shares of Meta rallied more than 8% in the premarket, setting them up to build on a more than 148% gain this year, as investor sentiment was buoyed by the company's "year of efficiency" cost-cutting initiatives and excitement around artificial intelligence. Analysts are also growing more excited about the stock's prospects going forward. Morgan Stanley said Meta is currently in its "AI glory days," citing the company's AI-driven engagement and revenue beat and raise. He maintained his overweight rating on shares while increasing his price target to $375 from $350. The new target price implies more than 25% upside from Wednesday's close. "META's AI investments continue to drive higher engagement, advertiser return, platform monetization and EPS. And the product pipeline is flush with a September AI event catalyst," analyst Brian Novak wrote in a note. "The current combination of rising platform-wide time spent and rising monetization of the new engagement (in particular on Reels) reminds us of the period when META was first growing/monetizing core Facebook, then Instagram … and then Stories. Engagement grows, monetization follows," Novak continued. Bank of America analyst Justin Post also increased his price target on Meta shares to $375 from $350. "Meta is hitting its stride again with a renovated tech stack and Reels strategy, gaining share in the industry," Post said in a Thursday note. However, Post added that the company's reduced capital expenditure outlook for 2023 came as a surprise, noting the company's losses from its virtual-reality platform Metaverse could extend its losses into 2024. With rising engagement, a robust advertising pipeline and product innovations mentioned in the latest earnings report, Meta remains Citi's top pick in the internet sector. The bank believes Meta's platforms focused on innovation "are best-positioned" and can continue the company's momentum as the broader online ad environment improves. Citi reiterated its buy rating, while raising its price target to $385 from $360. The new price target implies a 28.9% rally from where shares closed Wednesday. 'Year of efficiency' continues Goldman Sachs also reiterated its buy rating on Meta shares, while increasing its price target just shy of Citi's to $384 from $300. Analyst Eric Sheridan lauded the company's turnaround on revenue growth and margin expansion since the prior year. "While there were some mixed narratives (both qualitative and quantitative) around opex/capex in 2023/2024, our view is that management's 'year of efficiency' theme continues to drive a sustained mentality shift inside the company — while long-term investments behind key objectives remain a focus area (in terms of infrastructure & talent), we expect management to continue to balance driving growth and increased returns," Sheridan said in a Thursday note. Wells Fargo's Ken Gawrelski upgraded Meta to overweight from equal weight, citing accelerating tailwinds. "We were wrong on META. Blowout 3Q revenue guide appears sustainable and '24 OpEx/CapEx guide now largely de-risked," Gawrelski said in a Friday note. He cited further upsides from AI developments, in spite of its heavy spending on Reality Labs. Gawrelski raised his price target to $389 from $313. META YTD mountain Meta shares in 2023 Meanwhile, UBS hiked its price target to $400 from $335, implying 34% further upside. Credit Suisse's new price target is even higher, at $407 from $361. "Reels ramp delivers the upside," Credit Suisse analyst Stephen Ju said in his Friday note. Ju projects Reels will deliver double-digit growth over the next several years. Ju maintained his outperform rating on shares. UBS' Lloyd Walmsley was also bullish on Meta's new generative AI product pipeline and Threads. The analyst believes Meta's multiples "still look significantly too low at under 17x [UBS's] base case. … well below peers and the broader indices (NASDAQ and S & P 500)." Walmsley reiterated his buy rating on shares. JPMorgan's Doug Anmuth said, "Meta's considerable AI investments over the past couple years are paying off as AI-generated content drives incremental engagement (7% higher on FB) and AI powers Advantage+." He reiterated his overweight rating while lifting his price target to $425 from $300, one of the highest on the Street. His new price target implies shares surging 42.3%. — CNBC's Michael Bloom contributed to this report.