Shares of Facebook, Instagram, WhatsApp and Threads parent Meta Platforms (META +5.63%) rallied 5.7% on Thursday, as of 3:55 p.m. EDT.
Although one of the Magnificent Seven stocks, Meta's performance over the past year has not been so magnificent, with the stock just about flat and trailing all of its Mag Seven peers over that time.
However, one Wall Street analyst thinks better times are ahead, maintaining his bullish stance and keeping his optimistic price target on the stock in a new note today.
NASDAQ: META
Key Data Points
Jefferies says Meta could rally 45%
Today, Jefferies analyst Brent Thill published a note on Meta, reiterating his "Buy" rating and a $910 price target. That would mark about a 45% gain over yesterday's closing stock price.
Thill gives several reasons for optimism, one of which is Meta's underperformance relative to peer Alphabet (GOOG +0.72%)(GOOGL +0.65%) over the past year, with Alphabet having appreciated some 65% over that time while Meta has been flat, following a sell-off after its third quarter earnings report in October.
Meta is now the cheapest of the Mag Seven stocks, at just 28.5 times trailing earnings. And while much has been made of Meta's hefty spending plans for AI and the continued losses in its Reality Labs division, Thill still sees the core social media business benefiting from the company's AI flywheel. Additionally, Thill sees new monetization opportunities in messaging app WhatsApp, as well as Threads, Meta's competitive platform to Elon Musk's X (formerly Twitter).
Yesterday, Meta announced it would be rolling out digital ads to all global users of the Threads platform, after trialing ads in select markets beginning last Spring. Meta also disclosed that Threads now has an impressive 400 million monthly active users (MAUs).
Image source: Getty Images.
Meta needs to prove it can earn a return on its AI spending
Thill also expressed optimism that Meta's profligate spending on AI infrastructure and talent, which accelerated sharply last year, will begin to bear fruit in 2026.
This appears to be the big issue with Meta's stock right now. In 2022, the company changed its name to Meta and embarked on a quest to build out its Metaverse platform. Those tens of billions in spending don't appear to have much to show for it, at least not yet, with the Reality Labs division continuing to lose $4.4 billion last quarter alone.
In light of Reality Labs' continued losses, it's no surprise investors are skeptical of the company's massive generative AI investments today. The good news that Thill notes is that this AI spending still benefits Meta's core digital advertising business, which saw an impressive 26% growth last quarter, which is a notable growth rate for a business as large as Meta's social media properties.
Investors can look forward to hearing more on the company's AI progress next Wednesday, Jan. 28, when the company reports earnings.
