Meta Platforms Inc. saw its shares reach their highest close in over two years on Wednesday, boosted by impressive top-line results. The stock (META) rose by 3.7% to $370.47, marking its highest finish since September 16, 2021. It also recorded its largest single-day percentage gain since July 28, 2023.
Mizuho analyst James Lee identified three key factors contributing to Meta’s success in a note to clients. He highlighted the potential for revenue growth, the ability to lower operating expenses throughout the year, and the underappreciated benefits of its Messenger platform.
According to Lee, the stock’s outlook is positive, with the potential for even greater upside this year. He stated that early October saw a quick recovery in advertising following geopolitical uncertainties. Furthermore, holiday shopping showed surprising strength, Chinese advertisers such as Shein and Temu gained market share, and the partnership with Amazon for Shop Ads proved successful.
While Meta’s operating-expense guidance estimates a 15% growth metric for 2024, Lee believes the company has flexibility in managing expenses and may follow a pattern of lowering its operating expenses guidance throughout the year.
Lee also expressed optimism about the long-term potential of Meta’s Messenger platform. With new ad products and AI-driven customer service automation, Lee believes the messaging platform could achieve an international average revenue per user (ARPU) of $20 and increase Meta’s revenue base by 30%. Although the timing of reaching this level of monetization is uncertain, Lee sees attractive potential for owners of Meta shares.
Overall, Meta Platforms Inc. continues to demonstrate strong performance and promising prospects moving forward.