Meta’s stock has had a disastrous year in large part because the underlying company has had a disastrous year headlined by sweeping layoffs, weakening ad sales, and poor execution by CEO Mark Zuckerberg.
But the stock caught one believer on Friday finally headed into the New Year.
“Heading into 2023, we believe some of these top and bottom line pressures will ease, and most importantly, Meta is showing encouraging signs of increasing cost discipline, we believe with more to come,” said JP Morgan analyst Doug Anmuth in a new client note.
Anmuth lifted his rating to overweight (out-perform equivalent) from neutral. He sees fair value for Meta at $150, up from $115 previously.
Meta shares rose 1.5% to $117 in pre-market trading. The stock has crashed about 65% year to date, making the worst-performing component of the closely tracked FAANG (Meta/Facebook, Apple, Amazon, Netflix, Google) complex.
Here are the five drivers of Anmuth’s Meta upgrade:
1) Better cost controls by management on both total expenses and capital expenditures.
2) Lessening sales impact from Apple iOS privacy changes.
3) The company stands to compete more effectively against surging rival TikTok.
4) Reels monetization may gain steam and become “at least” neutral to sales in later 2023.
5) Valuation on the stock is “compelling” after the steep 2022 drop.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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