Meta’s ‘Year of Efficiency’ Is Coming to an End. Analysts Aren’t Worried.

Meta shares were down 3.1% in premarket trading at $290.33 on Thursday but analysts were positive about its future plans.

“While commentary on a hiring backlog may have made some nervous about potential opex [operating expenses] acceleration, we view the core message as clear: Meta plans to grow headcount at a much slower rate going forward,” wrote KeyBanc analyst Justin Patterson. 

Patterson raised his target price on Meta stock to $380 from $356 and kept an Overweight rating on the stock. 

Meta stock was punished in 2022 when investors and analysts reacted badly to its plans to spend on the Metaverse. However, AI spending is getting a warmer reception. Meta forecasts its capital expenditure will rise to a range of $30 billion-$35 billion next year, from $27 billion-$29 billion this year.

UBS analyst Lloyd Walmsley said the capex guide was better than feared and generative AI could offer a potential near-term catalyst, as Meta is set to roll out a series of new AI tools in the fourth quarter.

Walmsley raised his target price on Meta to $425 from $415 and kept a Buy rating on the stock.

Funding Meta’s AI ambitions depends on strong advertising revenue, which remains the company’s core business. Meta’s warning of near-term softening in advertising demand, potentially related to the Israel-Hamas conflict, took the stock down in after-hours trading on Tuesday. However, analysts are generally positive on the advertising outlook over the longer term after Google-parent
Alphabet
(GOOG) and social-media peer Snap (SNAP) both signaled an ad rebound. 

Meta’s users are growing at a healthy rate and its reported 31% increase in its ad impressions –a metric for how often an ad is displayed within an app– highlighted the company’s focus on monetization, according to Third Bridge analyst Scott Kessler.

Write to Adam Clark at [email protected]