Meta Platforms Inc. shares have more than doubled off their November lows, but a Morgan Stanley analyst still sees room to run.
Morgan Stanley’s Brian Nowak turned bullish on Meta’s
META,
stock Tuesday, upgrading it to overweight from equal weight while cheering the company’s newfound cost discipline and its potential for resilience in a tougher economic climate.
Shares of Meta were up 2.7% in morning trading Tuesday.
There are four themes underpinning Nowak’s upgrade, including that Meta has found religion on costs. The company recently announced plans to cut 10,000 more jobs beyond the 11,000-plus layoffs announced last fall, and Meta has brought down its expense forecast multiple times in recent months. Chief Executive Mark Zuckerberg and his team have dubbed 2023 their “year of efficiency.”
Read: Meta contrasts with ‘slow and lethargic pace’ of its rivals as it cuts more jobs
“We think [Meta’s] ‘year of efficiency’ is more than just a 365-day change … but rather a structural and cultural pivot to operate leaner and with a greater focus on investor returns … even through investment,” Nowak wrote.
He also sees numerous “call options” for Meta that could help the company’s revenue trends. These include artificial-intelligence tie-ins, a new paid verification program and the company’s click-to-message advertising format.
“We believe [Meta’s] large and unique data set (2.9bn daily users) and ability to invest position it to drive multi-year AI innovation,” Nowak wrote.
He acknowledged that Meta shares have dramatically outperformed the S&P 500
SPX,
since bottoming in November, with Meta shares up about 120% in that span, while the index has gained only 6%. But the stock’s valuation “still looks attractive, trading at a ~33% discount to peers on a growth-adjusted basis,” Nowak said.
Finally, he sees Meta as better positioned than other ad-exposed mega-cap internet names in the event consumer trends weaken. Google parent Alphabet Inc.
GOOG,
GOOGL,
“hasn’t reduced costs as aggressively,” he said, while Amazon.com Inc.’s
AMZN,
“retail profitability improvement is partially predicated on growing consumer [spending],” while macroeconomic uncertainty could push out growth improvements related to Amazon Web Services cloud-computing business.
Nowak boosted his price target on Meta shares to $250 from $190 alongside his upgrade. He became at least the second analyst to move to a bullish stance on Meta’s stock in recent days, joining Edward Jones analyst David Heger, who raised his rating Friday.
