By Sam Boughedda
Citi analysts released a note to investors on Friday, providing positive commentary on Meta Platforms (NASDAQ:META) and its Instagram Reels product.
The analysts, who reiterated a Buy rating and $222 price target on the stock, said that based on Citi's proprietary tracking of ads on Instagram Reels, they believe monetization is ramping.
"Our data suggests ad loads reached 14% in September compared to 8% in July and initial ad exposure is now earlier in the experience," wrote the analysts. "We recognize it remains early days in Reels monetization and the challenges in engagement given the competition in Short-Form-Video, but we also believe Reels could have naturally higher—and largely incremental—ad loads over time and integration of Reels content within Feed, Stories, and Messenger complements Meta’s evolving MSI."
In addition, Citi is encouraged by Meta’s newer ad formats announced earlier this week which, the analysts said, represents the beginnings of its rebuilt AI-based ad tech stack.
"While macro challenges persist, we believe improved Reels monetization, newer ad formats, and a greater focus on expenses create a compelling risk/reward in shares," the analysts concluded.