The Meta Platforms (NASDAQ:META) price target at JPMorgan was cut to $400 from $425 on Wednesday, with analysts maintaining an Overweight rating on the stock.
They said in a note to clients that the firm remains positive on Meta shares but is lowering our 2024 and 2025 EPS estimates primarily to account for greater increases in expenses.
"The biggest change in our model is increasing 2024 total expenses to $97.5B (from $93.4B previously), and we expect Meta to guide to a range of $96B-$102B. Our 2024 capex remains $38B, and we expect Meta to guide to a range of at least $35B-$40B," they explained.
"While Meta does not typically comment on forward-year revenue in conjunction with its forward-year expense outlook, we believe it's important to come away from 3Q earnings with a view that revenue can grow faster than expenses off the adjusted ˕23 expense base of ~$85M," they added.
The analysts noted that Meta is focused on the two big tech waves of AI and the Metaverse, and it will spend into those major growth opportunities while also remaining disciplined. They add that "AI is clearly paying off in terms of incremental engagement from AI-generated content and Advantage+."
"We believe it's important to see some early returns from Gen AI and Metaverse in 2024," said the analysts. "We remain positive on META shares as: 1) advertising should continue to outperform, with AI investments paying off and Reels approaching revenue neutral/accretive; 2) overall cost discipline should persist into 2024 even as investments pick up; and 3) valuation remains compelling with shares trading at 15x our updated 2025E GAAP EPS of $20.29."