Barton Crockett at Rosenblatt Securities believes Meta Platforms (META 2.52%) is undervalued at its current share price of $653. His target price of $1,144 per share implies 75% upside.
Keith Weiss at Morgan Stanley believes Atlassian (TEAM 2.80%) is undervalued at its current share price of $76. His target price of $290 per share implies 280% upside.
You should never put too much importance on individual forecasts, but most analysts believe Meta and Atlassian are undervalued. Meta's median target price of $852 per share implies 30% upside, and Atlassian's median target price of $150 per share implies 97% upside.
Here's what investors should know about these artificial intelligence (AI) stocks.
Image source: Getty Images.
1. Meta Platforms
Meta owns the three most popular social media platforms, as measured by monthly active users: Facebook, Instagram, and WhatsApp. That affords the company actionable insight into consumer behavior and interests, which supports precise content and ad targeting. In turn, it has become the second largest adtech company in the world.
Meta has doubled-down on its strong market presence by investing heavily in artificial intelligence products and capabilities. The company has developed machine learning models that retrieve, rank, and recommend content, as well as tools that help advertisers create and optimize campaigns. It has even designed custom chips to train and run the underlying models.
Meta stock is 17% below its record high, primarily because investors are concerned the company is spending too much money on AI. But those investments have had a tangible impact on the business. Revenue increased 24% in the fourth quarter as more engaging content drove an 18% increase in ad impressions, and better ad performance allowed the company to charge 6% more per ad.
Meanwhile, Meta plans to develop a superintelligence system that can be integrated into augmented reality (AR) smart glasses. The company already dominates the smart-glasses space, but the market itself is still in the early stages. Ultimately, CEO Mark Zuckerberg says AR glasses powered by superintelligence could replace smartphones as our primary computing devices.
The stock currently trades at 28 times earnings, a very reasonable valuation for a company with earnings that are forecast to increase at 21% annually through 2027. Long-term investors should feel comfortable buying a small position in this stock today.
NASDAQ: META
Key Data Points
2. Atlassian
Atlassian develops work management and collaboration software. The company is best known for Jira, a product that is particularly popular among software developers and operations (DevOps) teams. However, Atlassian also develops work management tools for non-technical teams (e.g., marketing), as well as IT service management software.
Consultancy firm Gartner recently recognized Atlassian as a leader in DevOps platforms and collaborative work management software, saying brand recognition with software developers creates significant opportunities to drive adoption with non-technical teams. And Forrester Research recognized the company's leadership in enterprise service management platforms.
Atlassian stock is 78% below its record high, primarily because investors are concerned AI code generation tools will replace developers, reducing demand for DevOps tools like Jira. But Morgan Stanley analysts argue that AI will have the opposite effect. "Productivity unleashed by AI will expand the pool of developers and spur a wave of app modernization initiatives supporting growth in developer seats."
Atlassian CEO Michael Cannon-Brookes has expressed similar conviction, and job market data shows companies are increasingly eager to hire developers. Last week, Goldman Sachs analysts wrote, "Software development job postings on Indeed have risen 11% in the past year, significantly outpacing postings across the broader labor market."
Additionally, Atlassian is leaning into demand for artificial intelligence with Rovo, a suite of AI capabilities for chat, search, and coding. Rovo recently topped 5 million monthly active users, up more than 40% from the previous quarter. Looking ahead, Morgan Stanley ranks Atlassian as one of the companies best-positioned to benefit from AI agents.
The stock currently trades at 17 times adjusted earnings, a relatively cheap valuation for a company with adjusted earnings that increased 27% in the most recent quarter. Additionally, Wall Street estimates that adjusted earnings will grow at 19% annually through 2027. Atlassian is a bargain at its current price.
