The Meta Platforms (NASDAQ:META) valuation leaves room for more upside, according to BofA analysts in a note Wednesday.
Reacting to the company’s recent earnings, analysts, who have maintained a buy rating and $375 price target on the stock, said that after reporting second-quarter earnings, Meta stock has slightly underperformed broader market and peers, drawing some questions on recent stock performance.
While 3Q revenue acceleration in Meta’s outlook topped bullish expectations, BofA believes the modest recent underperformance compared to the tech sector is a combination of concerns on potential above-Street 2024 expense/capex guidance, regulatory/Android uncertainty, the outlook for growing metaverse losses, the loss of Threads momentum, and the sentiment shift from topline acceleration in 2023 to potential deceleration in 2024.
However, analysts note several positive drivers in the second half of the year and 2024, including improving digital ad spend, Commerce acceleration in 4Q, Reels and Messaging being potential upside revenue drivers, and growing AI/ML capabilities.
“In nine months, Street will move to 2025 metrics and the stock is trading at 15x Street 2025 EPS at $19.76 (below S&P at 16x and Meta’s 5yr historical average of 19x). We believe the stock could see renewed enthusiasm on 2024 upside potential once Street has greater certainty on 2024 spending targets,” analysts concluded.
