Meta stock has had a good start to the year — up more than 5% — and momentum is looking strong.
It could get even better — the social media company is an artificial intelligence top pick, according to Jefferies analysts who say investors shouldn’t be put off by high AI spending.
Big Tech companies such as Meta, Microsoft and Google-parent Alphabet have been under pressure recently as investors have become concerned about hefty investments in AI — and when returns on those investments may start showing up on their balance sheets.
While ramped-up spending has spooked investors, that is no reason to worry about Meta, Jefferies analysts led by Brent Thill said in a research note published Wednesday.
Meta’s next capex guidance may even come in above Wall Street’s, already high, estimates given that the company has indicated it will give quantitative full-year guidance in the fourth-quarter report, scheduled for Jan. 29. But “strong returns from these investments,” including monetization progress on its open-source GenAI model Llama, are coming, Thill says.
The broker reiterated a Buy rating on Meta shares with a price target of $715. The stock traded up 0.9% in premarket trading Wednesday at $621.89.
Further boosting Meta stock is the uncertainty about TikTok’s future in the U.S. As President Donald Trump returned to the White House Monday, he gave the Chinese-owned social media app a 75-day reprieve to find a buyer for its U.S. operations, avoiding the immediate threat of being banned.
Thill notes that a TikTok ban or temporary shutdown should be a tailwind for Meta in the first quarter of 2025 as teens flock to Instagram, an app owned by Meta with features similar to TikTok’s. However, it will likely be conservative in baking this impact given how fluid the situation is, Thill adds.
Other companies highlighted as potential benefactors of a TikTok shutdown are Snapchat-parent Snap and Alphabet’s YouTube. However, the former is an unlikely alternative to TikTok as its primary function is direct messaging, as Barron’s has reported .
Meta has been in the limelight lately for other reasons as well: CEO Mark Zuckerberg announced an end to Facebook fact-checking and plans to cut 5% of its worst-performing staff that drew both praise and criticism.
Meta stock is up 5.3% so far this year, while Alphabet has gained 4.6% and Snap is down 2%.