Meta's Advertising Strength More Than Supports Reality Losses: Analyst

Barton Crockett, Rosenblatt's senior research analyst, joins Seana Smith and Brad Smith in Morning Brief to share his bullish stance on meta-platforms.

“Growth supports the multiple…The bigger picture, we think, is that people are becoming more comfortable with Meta's strategic positioning. Their investments in AI have resulted in higher returns on investment for marketers and better user engagement, and they have, in a sense, led and developed this direct marketing for small and medium-sized businesses around the world. This almost new niche that they have opened up and occupied,” Crockett explains.

He says: “Honestly, I think the biggest concern with the stock in the past has been expenses, right? In particular, their investments in their reality segment, which in my opinion are excessive and will not produce a return that we believe is commensurate with the investment. But they do it better. The devices they recently introduced at their Meta Connect are being better received by consumers than what Apple is currently doing. And their Ray-Bans could actually be a hit this Christmas.”

Although the analyst believes that Meta's investments in the reality segment will not necessarily pay off, he explains that Meta can afford the project. “The amazing thing is that they never have to make money from it. We don't assume they will. So that earnings growth is impressive enough and supports equity from here, you know, if they did.” You know, we're expecting to lose 17 billion in operating profit this year, and that's going to be a total be more than 60 billion. And yet they increase earnings per share.”

Crockett says Meta is “so strong in advertising marketing that they can support this essentially dream tax on reality and you can still make a good case for the stock.” He explains: “These guys increased their advertising revenue by 20 % Compared to the same quarter last year, we assume that they will also grow almost twice as fast in the final quarter of September. Google's growth rate is exactly on par with Amazon with its new advertising presence and is not too far behind the darling of connected television, the trade desk… These guys are big. They are growing quickly, and that is a very profitable growth stream.”

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This post was written by Naomi Buchanan.