Meta Platforms Inc.’s narrative has been winning points with investors this year, as the company works to shake the perception that its brands have fallen out of fashion amid TikTok’s surge.
The company’s July 26 earnings could show a rosy picture for Instagram, and the company might have artificial intelligence to thank in part for the momentum, according to a Deutsche Bank analyst.
Investors appear increasingly upbeat about the digital-advertising market and Meta’s
ability to recognize efficiency gains while also leaning on artificial-intelligence investments to fuel “strong engagement and monetization trends,” namely at Instagram, Deutsche Bank’s Benjamin Black wrote in a note to clients Wednesday.
Black himself is feeling more optimistic about Meta’s story ahead of the report, boosting his price target to $350 from $290. “Recent ad checks indicated ad spend has progressed nicely through the quarter, and Facebook and Instagram have been positive relative to peers,” he wrote.
He views Meta as a potential beneficiary from the AI frenzy beyond its role in enhancing content recommendations for users, as the company also leans on the technology to augment its advertising offerings. Meta could use AI and machine learning to help advertisers more easily create short-form video spots and respond to customer queries through Messenger.
These areas “should expand the monetization opportunities for Meta,” Black said.
Down the line, he also has a positive view on Meta’s ability to capitalize on the strong initial popularity of its Threads app that’s meant to offer an alternative to Twitter. “We note the recent launch of Threads has already reached 100mn users and adds optionality to an already strong ad recovery story,” Black wrote.
Barclays analyst Ross Sandler weighed in on Threads as well Wednesday, writing that it could mark the start of a “new phase” for the company.
He asked if Meta was “is in a position to continue leveraging its infrastructure, graphs and AI to launch more and more dedicated stand-alone apps like Threads and Messenger,” suggesting that the company could potentially “pull Reels out of Instagram and into its own dedicated app like TikTok, which would allow it to compete better without any internal metric tension and trade-offs with Instagram Feed and Stories?”
“If this ‘platform’ strategy was to take hold, whereby apps are launched out of existing apps, we think the P/E [price-to-earnings multiple] assigned to META shares could expand greatly, as it introduces a bunch of new use cases and opportunities to increase engagement and revenue,” Sandler said.