Meta Platforms Faces Setback in Recent Tech Selloff

by Warren Seah

Meta Platforms, formerly known as Facebook, experienced a sudden turn in its stock performance, joining its tech industry peers in the red on Thursday. Despite this setback, analysts maintain an optimistic outlook for the company’s future.

Morgan Stanley analyst Brian Nowak rates Meta as Overweight with a price target of $375, suggesting a 25% upside from the stock’s closing price on Wednesday.

In a research note published on Thursday, Nowak projected that Meta’s earnings would rise to $20 per share by 2024. He highlighted the untapped revenue opportunities presented by Facebook Reels, surpassing Wall Street’s estimates of $16.85 per share for 2024. This projected growth represents a significant jump from the 2022 earnings of $8.59 per share, according to FactSet.

Nowak emphasized that the average revenue per user for Reels stands at approximately 28% of the rate of other Meta engagement. While this already represents an improvement from the previous year, it underscores the untapped revenue potential of Reels.

“The fact that Reels engagement is driving incremental time spent on the platform… gives more confidence in Reels’ ability to drive META’s ad revenue,” Nowak added.

Despite Nowak’s positive stance, Meta’s stock dipped 1.3% to $295.26 on Thursday amid a broader tech selloff. The tech-heavy Nasdaq Composite also experienced a 1.1% decline and was on track for its fourth consecutive day in negative territory. Investors have expressed concerns regarding potential interest rate hikes following hawkish comments from Federal Reserve officials and strong economic data throughout the week. Such hikes can put pressure on growth tech stocks as they diminish the value of future cash flows.

Nevertheless, most analysts remain bullish on Meta stock, which has soared by an impressive 149% year-to-date. Out of the 58 analysts surveyed by FactSet, 51 recommend buying the stock, six suggest holding, and one rates it as a sell.

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