Meta Platforms, formerly known as Facebook, experienced a skyrocketing surge in market value on Friday, making it one of the most impressive one-day gains for a U.S. company. Investors celebrated Meta's exceptional earnings report, driving its stock price up by 21% to $479.03 during late morning trading. If Meta shares close above $469.80, the company will surpass Amazon.com's record gain of $191.26 billion set in February 2022 and accumulate over $200 billion in market value in a single day. In comparison, the S&P 500 saw a modest increase of 0.7%, while the Nasdaq Composite jumped 1.2% on Friday.
This success was largely attributed to Meta's higher-than-expected advertising revenue in the latest quarter. The implementation of artificial intelligence-driven recommendations on both the Facebook and Instagram platforms resulted in increased user engagement. Additionally, the introduction of a dividend for the first time pleasantly surprised investors.
Stifel analyst Mark Kelley commented on Meta's positive performance: "Commentary across Reels, Advantage+, and Shopping were positive, and we expect the next wave of advertiser-focused AI tools to keep this momentum going. The icing on the cake is the dividend that will bring in a new class of investors and should enable another re-rating for shares."
In response to these developments, Kelley raised his target price on Meta stock to $527 from the previous $405. This was just one example of many analyst upgrades seen across Wall Street, further validating Meta's recent achievements.
Accelerating Growth in Ads Biz for Meta
Truist Securities analyst Youssef Squali recently commented on Meta's promising results in the advertising business. According to Squali, these results indicate a significant growth surge in the fourth quarter and sustained momentum into the first quarter of 2024. Factors contributing to this growth include higher user engagement, the success of Reels and Messaging ads, and the integration of artificial intelligence (AI). With these positive indicators, Squali has raised the target price for Meta stock to $525 from $405 and maintains a Buy rating.
While advertising and AI take center stage, Meta CEO Mark Zuckerberg remains confident in the long-term potential of the Metaverse. A testament to this is Meta's Reality Labs unit, which specializes in virtual-world technology and generated over $1 billion in revenue for the first time in the final quarter of 2023.
However, it is worth noting that Reality Labs also experienced an increase in operating losses, totaling $4.65 billion compared to $4.28 billion in the same period the previous year. Meta anticipates a further meaningful increase in operating losses for this unit in the coming year.
In addition to these challenges, Meta now faces competition from Apple's Vision Pro headset in the mixed-reality market. Nevertheless, Zuckerberg predicts that Meta's Quest 3 will remain the most popular mixed-reality device. Furthermore, the Ray-Ban Meta smart glasses, launched in October, have had a strong start in the market, and manufacturing partner EssilorLuxottica intends to produce more units than initially anticipated.
Overall, these developments suggest promising growth opportunities for Meta as it navigates the dynamic landscape of the advertising business and explores the potential of the Metaverse.
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