TD Cowen Upgrades Meta as Social Media Stock Enters Second Half of "Year of Efficiency"

TD Cowen Upgrades Meta Stock, Expects Further Growth and Monetization

Bullish Outlook

TD Cowen analyst John Blackledge has upgraded Meta, the parent company of Facebook, to outperform from market perform and raised the price target to $345 from $220. This change implies an upside potential of 11.5% from the previous day's closing price. Blackledge acknowledges that his initial estimate of Meta's cost-cutting efforts was too conservative, as the company went on to implement headcount cuts and other cost initiatives as part of their "Year of Efficiency."

Growing Engagement and Monetization

Blackledge believes that Wall Street will likely need to raise its estimates for Meta due to the potential monetization growth in Reels, a feature on the Instagram platform. According to a Cowen survey, Reels has effectively increased engagement and overall time spent on Instagram. In addition to Reels, Blackledge sees potential in other ad formats and products in the long term.

Further Cost Cuts and Monetization Opportunities

Apart from potential revenue growth, Meta's ongoing cost-cutting initiatives, including layoffs and a spin-out, are expected to contribute to its financial performance. Despite forecasted losses from the Metaverse of nearly $14 billion this year, Cowen still sees room for further cost cuts. Additionally, Meta's new social media platform, Threads, has garnered over 100 million signups in its first five days. If engagement on Threads continues to grow, the platform could become another source of monetization for Meta.

Positive Market Sentiment

Blackledge's upgrade aligns him with the majority of Wall Street, as over 80% of analysts hold buy ratings on Meta's stock. The market's positive sentiment is reflected in Meta's stock price, which has rallied over 150% this year, although it has not fully recovered from its 2022 decline.

In summary, TD Cowen's upgrade of Meta's stock and optimistic outlook reflect the company's dedication to efficiency and growth. With Reels, Threads, and other potential ad formats and products, Meta has the opportunity to further monetize its platforms and drive revenue.

How the Upgraded Meta Stock May Impact a New Business

The recent upgrade of Meta's stock by TD Cowen and the bullish outlook for further growth and monetization present potential implications for new businesses entering the market. Here is a "hot take" analysis of how this topic may impact a new business:

1. Increased Monetization Opportunities: Meta's focus on monetization growth, particularly through features like Reels on Instagram, highlights the importance of offering innovative and engaging advertising formats. For new businesses, this signifies the need to prioritize the development of unique and captivating ad formats that can attract users and generate revenue.

2. Cost Optimization Strategy: Meta's ongoing cost-cutting initiatives demonstrate the significance of efficiency and streamlined operations for long-term success. New businesses should consider implementing cost-cutting measures from the early stages to ensure financial stability and growth potential. This could include optimizing processes, leveraging technology, and carefully managing resources.

3. Market Sentiment and Investor Confidence: The positive sentiment in the market surrounding Meta's stock, as reflected by its significant rally, indicates the opportunity for new businesses to attract investor confidence. Developing a compelling growth strategy, showcasing potential revenue streams, and building a solid brand reputation can contribute to creating a positive market perception and attracting investment opportunities.

4. Embracing Emerging Technologies: Meta's entry into the metaverse and the success of its social media platform, Threads, underscore the importance of embracing emerging technologies. New businesses should be prepared to adapt to evolving trends and explore new avenues for growth, such as virtual reality, augmented reality, or blockchain technology, to remain competitive in a rapidly evolving digital landscape.

In conclusion, new businesses should carefully observe Meta's strategies and market reception as it provides valuable insights into effective monetization, cost optimization, investor confidence, and technological trends. Incorporating these learnings into their own business strategies can potentially drive growth and success in an increasingly digital and competitive environment.



Article First Published at: https://www.cnbc.com/2023/07/13/td-cowen-upgrades-meta-as-social-media-stock-enters-second-half-of-year-of-efficiency.html