Meta's Reels Monetization and AI Innovations Drive Top AI Pick: Analyst

BofA Securities analyst Justin Post maintained a Buy rating on Meta Platforms Inc META with a price target of $630.

Meta’s third-quarter earnings will likely exceed expectations with revenue of $40.4 billion and EPS of $5.35, slightly above Street estimates of $40.2 billion and $5.19, respectively, as per Post.

The growth is driven by several factors, including new AI tools and CRM integration, which are boosting return on investment (ROI) and increasing ad spend.

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Messaging and Reel monetization are ramping up, and a modest 100-200 bps benefit from political ad spending is expected.

Post noted that Meta could lower the upper end of its 2024 expense guide by $1 billion, from $98.2 billion to $96 billion—$98 billion, thanks to layoffs and a reduction in job openings.

Capex, however, could trend toward the higher end of guidance, between $37 billion—$40 billion, as Meta continues to invest heavily in AI infrastructure, as per the analyst.

The fourth-quarter revenue guidance will likely range between $45 billion—$47.5 billion, with ad revenue growth decelerating by 2 points to 16% year-over-year, he noted

However, as per Post, growing AI benefits for ad targeting, more robust Reels usage, and incremental political ad spending could offer marginal upside.

He said Meta remains well-positioned in AI, with analysts forecasting multi-year growth opportunities, particularly through generative AI and infrastructure developments.

Despite potential near-term volatility due to high expectations, Meta’s stock has risen 63% year-to-date, maintaining its status as a top AI pick.

Price Action: META stock is up 1.23% at $582.21 at last check Tuesday.

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