Analysts at UBS have raised their price target for Meta Platforms, the parent company of Facebook, Instagram, and WhatsApp, on their view that the tech giant will be an artificial intelligence (AI) winner.
“We expect Meta to integrate generative AI (GenAI) broadly into its apps and increasingly be viewed as an AI winner, providing another leg to the bull case,” the analysts wrote.
“There has been chatter of Meta AI tools, but investor conversations have focused narrowly on the ad tech angle, less around consumer applications that could drive new engagement and ad units. We do not think this is priced into shares currently.”
They noted that Meta plans to release several GenAI chatbots of “AI assistants” with unique skills for users on Instagram, WhatsApp and Facebook, with reports pointing to product introductions later this year.
These chatbots have commercial applications such as tapping into shopping behavior already present on Instagram and WhatsApp in particular, the analysts highlighted.
“Our analysis shows that a chatbot could add $7.5 billion/$0.86 in FY24 revenues/earnings per share (EPS), if Meta monetizes 5% of search queries on the Facebook app alone, suggesting a bull case opportunity of $15 billion of topline potential long-term,” they wrote.
As such, the analysts reiterated their ‘Buy’ rating on Meta stock and increased their price target from $300 to $335. Meta's shares are currently trading at $280.
They noted that, at the stock’s current share price, it is trading well below its historical multiples on an absolute basis and relative to the S&P 500.
“Meta remains our top pick, with an attractive plus 48%/negative 30% upside/downside skew,” the UBS analysts wrote.
“We expect the impending move back into the Russell 1000 Growth Index (from value) to cause growth investors to revisit the story (and like what they see).”
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