- Meta will be the top-performing mega-cap internet stock in 2023, Jefferies predicted Monday.
- Earnings from the company’s Instagram Reels will be one of the drivers for the stock.
- Meta shares plunged 64% in 2022 in an overall dismal year for tech stocks.
Meta will emerge as the best-performing mega-cap internet tech stock this year, said Jefferies, who will count short videos on his Instagram holdings as a pillar of strength after the stock bottoms out in the S&P 500 in 2022 .
The investment group made the call to clients in a Monday note on internet stocks. She said she is neutral on the sector but stressed her preference to be positioned in mega-caps like Meta, Alphabet and Amazon in 2023. She said sizeable balance sheets at such companies should allow them to “resist prolonged macro deterioration,” while their core businesses should lead an eventual recovery.
“META will be the top-performing mega-cap driven by cost cutting and new monetization drivers,” equity analysts led by Brent Thill said in the note. Jefferies has a meta price target of $155, which indicates a 19% increase from Friday’s close of $130.02. Meta shares are down 64% in 2022.
Jefferies said it sees three reasons to be bullish on Meta stocks in 2023.
“At 16x GJ23 EPS, META is among the cheapest names in our coverage, but we believe there are multiple top and bottom line catalysts to propel the stock higher,” Thill said.
Second, the revenue gain is driven by the company’s “fast-growing” Instagram Reels short video feature, which has a revenue rate of $3 billion, as well as click-to-messenger and click-to-WhatsApp ads. Those ads together represent a revenue rate of $10.5 billion, the analysts said.
Third, Meta has focused on cost discipline, which is likely to further protect earnings per share.
“We believe that the ongoing privacy headwinds, competition from TikTok and a deteriorating macro environment are likely well understood at current levels,” Thill said.
Meta said in November it plans to cut more than 11,000 employees, or about 13% of its workforce. CEO Mark Zuckerberg acknowledged that he had misplanned large investments in the company.
Meta was among the S&P 500’s 10 biggest percentage decliners in 2022 as tech stocks overall were hurt by rising interest rates and inventors worried about Meta’s expensive foray into a Metaverse strategy that was at the heart of Facebook’s rebranding in 2021 stood.