JPMorgan Friday upgraded Club holding Meta Platforms (META) on the back of increased cost discipline and receding headwinds in 2023. And we agree that Meta’s stock, one of the worst performers in the S & P 500 this year, could be poised to make a comeback — but only if management takes greater step to rein in spending. Analysts at JPMorgan lifted the bank’s designation on Meta’s stock to overweight, or buy, from neutral, while raising their price target to $150 a share from $115. The revisions come with Meta’s stock down more than 64% year-to-date. The Facebook and Instagram parent has been weighed down by its heavy investments in the metaverse, hiring and expenses growth, competitive pressure from TikTok, and Apple’s new App Store guidelines , among others. Like other tech giants, Meta has also faced broader macroeconomic pressures this year, including inflation, a stronger U.S. dollar and rising interest rates. “Heading into 2023, we believe some of these top and bottom line pressures will ease, and most importantly, Meta is showing encouraging signs of increasing cost discipline, we believe with more to come,” JPMorgan analysts wrote in research note. Meta last month laid off more than 11,000 employees , or 13% of its workforce, amid ballooning costs and increased pressure on its share price. Shares of Meta were trading up nearly 3% in midday trading Friday, at $119.48 apiece. In addition to more efficiently managing costs, analysts at JPMorgan expect Meta to face less of a hit next year from Apple’s App Store privacy changes, as some advertisers return to the platform. At the same time, the analysts expect its Reels video offering to be a “monetization engine” in 2023, helping Meta keep apace with competitor TikTok. The bank raised its 2023 revenue and earnings-per-share estimates for Meta by 2.6% and 20%, respectively. “We believe Meta is building the muscle for more sustainable financial discipline that can help drive further upward earnings revisions [and] we believe the risk-reward is attractive at current levels,” the analysts wrote. The Club take Club holding Meta has been bogged down by softer advertising spending and increased competition at a time time when it has invested aggressively to build out the metaverse. But, believe it or not, money can be made in the stock market when situations go from very bad to less bad, as indicated by JPMorgan’s thesis Friday. It’s hard not to be encouraged by what the analysts are seeing. And we continue to see Meta’s underlying fundamentals as resilient. We hope to see some advertising losses come back next year, which could help support Meta’s decelerating top-line growth. At the same time, Meta CEO Mark Zuckerberg told Jim Cramer he’s spending less time on the metaverse than what was originally thought, which is welcome news as investors. It would also be encouraging if he were to reduce some of the massive investments at its virtual- and augmented reality unit, since profit turnaround at this segment is still a big question mark. In the short term, we continue to look for management to realign its expense growth with revenue growth, in order to protect earnings as we wait for the economy to bounce back. (Jim Cramer’s Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A logo of Meta Platforms Inc. is seen at its booth, at the Viva Technology conference dedicated to innovation and startups, at Porte de Versailles exhibition center in Paris, France June 17, 2022.
Benoit Tessier | Reuters
JPMorgan Friday upgraded Club holding Meta Platforms (META) on the back of increased cost discipline and receding headwinds in 2023. And we agree that Meta’s stock, one of the worst performers in the S&P 500 this year, could be poised to make a comeback — but only if management takes greater step to rein in spending.
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