Meta Platforms Inc. is still at the beginning of several narratives that could power its stock even higher, according to an analyst.
JMP Securities analyst Andrew Boone boosted his price target on Meta shares $(META)$ to $350 from $300 Monday, cheering numerous opportunities ahead of the company, including momentum with the Reels content format and continued progress with cost-cutting efforts.
The company "is in the early stages of benefiting from multiple product catalysts," Boone wrote.
His look at third-party data suggests that Reels engagement is strong, "adding incremental time and impression growth" to Meta. Here, the company seems to be benefiting from its artificial-intelligence moves, which are helping improve recommendations and thus getting people to spend time watching content for longer.
Reels represented a roughly $500 million headwind to Meta's revenue in the third quarter of 2022, as the content format monetized at lower rates than the core newsfeed. But Boone is upbeat about third-party data on the portion of consumers who've followed or contacted businesses after watching Reels, a factor that's driven ad-auction density growth lately, in his view.
That dynamic has powered Reels "toward revenue neutrality with the Feed, which we believe is still on pace to be achieved by year end."
Additionally, Boone said he thinks Meta is making good use of AI to improve the performance and models of its ads. He called out Advantage+, an ad tool that uses machine learning to help marketers create campaigns.
"Simply put, we believe Advantage+ is improving return on ad spend and helping to attract more budgets to Meta as our checks are broadly positive on the product," he wrote.
Meta has won over Wall Street in recent months with its focus on cost cutting, which has driven lower spending expectations relative to eye-popping sums posited by the company late last year. Boone anticipates that Meta will trim its annual expense forecast once again when it reports results July 26.
Boone has a market-outperform rating on Meta shares, which have rocketed 157% so far this year.
