"At this juncture, the higher the AI spending bar, the higher the expectations bar is likely to be in the new year, and for companies like Meta Platforms, it seems like the shares are looking relatively cheap for a reason. But what happens if there are decent returns that lie just a bit further down the road that investors and analysts can't yet see?"
"In such a case, shares of Meta Platforms may very well be in for more consolidation or even downside before investors come to the realization that its AI strategy is paying off, perhaps many times over. Some upbeat analysts over at Morgan Stanley seem to think that the new year could be incredibly kind to the social-media juggernaut. Notably, they see revenue re-acceleration at the hands of stronger ad demand as well as improved performance of ads at the hands of AI."
Meta Platforms represents a prominent value opportunity among large technology firms for investors focused on AI. Investor selectivity within leading tech names has grown due to performance variance, differing expectations, and AI potential. Market chatter about stretched valuations and AI skepticism increases required tolerance for turbulence, particularly for firms with heavy AI spending. Meta's shares trade at low multiples but elevated expectations reflect substantial AI investment. High AI spending raises the bar for near-term results, and shares could consolidate or decline before AI benefits are realized. Positive scenarios include ad revenue re-acceleration driven by stronger ad demand, AI-enhanced ad performance, and momentum from Reels and WhatsApp business messaging.
Read at 24/7 Wall St.
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