Meta Platforms: A Buy With Upside Potential, Says DA Davidson Analyst
DA Davidson analyst Gil Luria has initiated coverage of Meta Platforms Inc (META) with a Buy rating and an impressive price target of $600, citing the company’s robust positioning in critical future technologies like AI and spatial computing, as well as an attractive valuation relative to its mega-cap peers.
Key Takeaways:
- Meta Platforms is a top pick within the mega-cap space: Luria highlights Meta’s leadership in the open-source side of crucial future platforms, AI and spatial computing.
- Meta’s strategic advantage: The analyst argues that unlike previous technology revolutions, AI and spatial computing necessitate vast scale, reach, and capital, positioning Meta Platforms strategically due to its open-source approach.
- Open-source leadership: In contrast to other tech giants like Alphabet, Apple, Amazon, and Microsoft, who are pursuing a closed garden strategy for these platforms, Meta is leading the open-source charge.
- Valuation and upside potential: Luria’s $600 price target represents a 24x multiple of 2025 EPS, signifying a premium over Alphabet due to Meta’s superior positioning.
- Lower valuation compared to peers: At 21x, Meta is one of the less expensive mega-caps when compared to its peers, offering a compelling downside protection.
AI and Spatial Computing: The Future of Tech
Luria believes that Meta’s open-source strategy in AI compute and spatial computing will be crucial for the company’s long-term success. He expects a fierce competition in the closed-garden side of AI compute among the Big Techs, but sees Meta as the clear leader in the open-source space.
AI Advantages for Meta:
- Meta’s head start: While Google is facing the challenge of transitioning to AI-enhanced Search, Meta is already reaping the benefits of AI advancements, leading to improved ad delivery and higher yields.
Spatial Computing: A Competitive Edge
Luria anticipates that the billions invested by Meta in Reality Labs will establish a strong moat in the spatial computing space, positioning them as the open-source winner alongside Apple’s closed-garden approach.
The Benefits of Founder-Led Innovation
According to Luria, Meta exemplifies the advantages of being led by its founder, CEO Mark Zuckerberg, more effectively than any other mega-cap, including Nvidia Corp. He believes that this leadership is crucial in navigating the complex landscape of these emerging technologies.
Looking Ahead: Q3 Forecasts and Price Action
Luria projects Meta Platforms’ third-quarter revenue at $40.2 billion and EPS at $5.25. Additionally, on Tuesday, META stock was up 0.30% at $506.30.
Meta’s Future: Strong Positioning for Growth
Analysts like Luria are increasingly bullish on Meta Platforms’ future due to its strong positioning in critical emerging technologies and its attractive valuation. The company’s open-source strategy and leadership in AI and spatial computing could prove to be key differentiators in the years to come.
