Meta Platforms' (META -2.41%) share price bottomed out in 2022, but the stock has soared to new highs as the digital advertising market showed signs of recovery. Analysts at Citigroup see growing user engagement on Instagram Reels leading to higher revenue in the near term, which could further boost the stock price.
The firm raised its price target on Meta from $525 to $590 -- a figure that's nearly 18% above the current $500 share price -- while maintaining a buy rating on the shares. Wall Street price targets are usually estimates for where a stock might trade in the next 12 months, so Citi is pointing to a catalyst that could have positive implications for Meta's growth beyond 2024.
Is Meta stock a buy?
Meta has been investing heavily in artificial intelligence (AI), which powers content recommendations and advertising across its family of apps. More advanced AI models will have a direct impact on the amount of time users spend browsing their feeds as the ads and content they see become more aligned with their interests.
Citi analysts specifically noted positive momentum in its advertising load tracker for Instagram Reels. The bank's analysts believe Meta is seeing progress from recent ad innovations such as AI-recommended content and growing advertiser demand for Reels. As a result, the analysts raised their revenue estimates ahead of the company's first-quarter earnings report (scheduled for release on April 24). The Wall Street consensus estimate is that Meta's revenue increased by 18% year over year to $33.8 billion in the quarter.
Meta is coming off a strong year of growth, with revenue and earnings both rising by double-digit percentages, and the analysts' consensus estimate is that its earnings per share will grow by 35% this year.
Given the company's high earnings growth, the stock's forward price-to-earnings ratio of 25 is attractive. It certainly isn't far-fetched to believe the stock could climb another 18% over the next 12 months to hit Citi's new price target.
