META's AI Tryst: Your Ad Dollars are About to Work Harder and Smarter, Analysts Highlight

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• Oppenheimer analyst Jason Helfstein maintains Meta Platforms Inc (NASDAQ: META) with an Outperform, raising the price target from $285 to $350.
• The analyst believes META is well-positioned to drive higher pricing and engagement from AI investments. Of content, 20% is AI-recommended. META has AI-powered Advantage+ ads and has launched other ad tools through AI Sandbox, which alters text, images, and backgrounds. First-quarter 2023 also marked the first quarter since 2Q21 that META ad revenue outpaced peers'.
• META is working on incorporating AI into its click-to-message ads and customer service chatbots, enabling SMBs to automate customer service chat. He believes the industry is working toward generating synthetic video ads for SMBs, made using AI and edited on a per-user basis to increase ROI.
• Such investments have been the significant reason for META's outperformance vs. the digital ad market in 1Q23 and should support outperformance through 2024, the analyst writes.
• Depending on AI tools' effectiveness, META marketplaces could also compete more directly for SMB spending with marketplaces EBay Inc (NASDAQ: EBAY)/ Etsy, Inc (NASDAQ: ETSY)/ Amazon.Com, Inc (NASDAQ: AMZN).
• Customer support AI chatbots give META access to SMBs' expenditures on customer support staff. Combined, these markets offer $1.2 trillion of revenue opportunity, the analyst said.
• With shares trading at a ~30% discount to NASDAQ on FY24 P/E, the analyst sees them as highly attractive at current levels, despite up 125% YTD.
• The target implies 22x FY24E GAAP EPS, an 8% discount to the current NASDAQ P/E.
• JMP Securities analyst Andrew Boone maintains Meta Platforms with a Market Outperform and raises the price target from $270 to $300.
• The analyst said Instagram represents ~1/3 of Meta ad revenue and that Reels still monetizes well below the feed, Instagram's U.S. April and May time spent growth of +17% Y/Y and +19% Y/Y, respectively, should be incremental to monetization as he projects +9.5% Y/Y ex-FX advertising growth for 2Q23.
• Price Action: META shares traded higher by 0.54% at $271.13 on the last check Monday.

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