Still more upside to Meta Platforms, says Roth

It’s been a good year so far for Meta Platforms (Meta Platforms Stock Quote, Charts, News, Analysts, Financials NASDAQ:META), as shares are already up over 130 per cent. But investors can expect more upside to come, according to Roth Capital Partners analyst Rohi Kulkarni, who delivered an update on the company and stock to clients on Friday and reiterated a “Buy” rating.

“Despite YTD stock price action, META shares remain reasonably valued, in our opinion,” Kulkarni wrote. “Shares are currently trading at slightly less than 19.0x P/E (2024) versus potential 28 per cent three-year EPS CAGR (from 2022-2025).”

Now with a market cap of $730 billion, Meta Platforms started the year at lows not seen in half a decade, following a precipitous decline over the back end of 2021 and through 2022. META shares were at $120 as of January 1 of this year and have mostly headed straight up since then, reaching this week the $280 mark.

One of the key drivers, according to Kulkarni, has been the company’s positive earnings releases, which saw a 40 per cent increase in operating income estimates and a 30 per cent increase in P/E ratio. Analysts’ consensus estimates on 2023 revenue and operating income have risen four and 39 per cent, respectively, while 2024’s revenue and operating income estimates have gone up by two and 36 per cent, respectively.

Kulkarni said his industry and channel checks point to continued improvement in META’s ad engine going forward along with likely incremental ad allocations returning from TikTok over the past six months. 

By his own numbers, Kulkarni is forecasting Meta Platforms’ revenue to go from $116.6 billion in 2022 to $128.5 billion in 2023 and to $140.3 billion in 2024. EPS is projected to go from $8.61 per share in 2022 to $12.19 in 2023 and to $15.23 in 2024.

With his “Buy” rating, Kulkarni raised his target price on META from $255 per share to $315 per share, reflecting at press time a projected one-year return of 10.6 per cent.

“Among Mega Cap Internets, Amazon is our #1 pick, followed by META at #2, and Alphabet at #3. We view all three Mega Caps to be significant medium-term beneficiaries from the ongoing Gen AI wave,” he wrote.