TD Cowen: Meta and Google Face Stock Overhang
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Should l Buy META?
TD Cowen believes the jury verdict in the case against Meta Platforms (META) and Alphabet's (GOOG, GOOGL) YouTube leaves a stock overhang that "could persist as these matters are resolved in coming years." The firm noted that Snap (SNAP) and TikTok were also part of the lawsuit, but settled prior to the trial. TD Cowen added that in a separate case, Meta was found liable for claims "alleging that the company knowingly endangered children who used Instagram and Facebook," which the company reported plans to appeal.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 547.540
Low
655.15
Averages
824.71
High
1117
Current: 547.540
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Positive Market Outlook: Montaka maintains a positive outlook, believing that long-term opportunities will grow as AI adoption accelerates, particularly in investments in data centers, semiconductors, and critical commodities like lithium, reflecting confidence in structural trends.
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See More
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See More
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- Micron Technology Outlook: Cantor Fitzgerald has set a target price of $700 per share for Micron Technology, implying a 98% upside from its current price of $352, with the company benefiting significantly from strong growth in the data center segment amid a memory chip supply shortage.
- AppLovin Growth Potential: Citigroup has set a target price of $820 per share for AppLovin, indicating a 115% upside from its current price of $380; despite concerns about AI disrupting traditional advertising models, the company is at the forefront of ad tech innovation.
- Industry Cyclicality Risks: Although Micron's stock is currently 23% below its historical high, analysts generally believe it is undervalued, with expectations of a 13% annual growth in adjusted earnings through fiscal 2029, making the current valuation of 16 times adjusted earnings appear reasonable.
See More
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- Performance of the Magnificent Seven: Wall Street's 'Magnificent Seven' includes Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta, and Tesla, which, while all possessing sustainable competitive advantages, show significant differences in price-to-earnings and cash flow ratios, with Tesla and Apple having cash flow ratios of 81.5 and 24.3 respectively, indicating high valuation risks.
- Cash Flow Ratio Analysis: As of March 24, Meta and Amazon's forward-year cash flow ratios stand at 9.3 and 9.7, respectively, marking them as relatively cheap investment options within the Magnificent Seven; notably, Meta's social media assets attracted an average of 3.58 billion daily users, enhancing its advertising pricing power.
- AI and Advertising Revenue: Meta's integration of generative AI solutions into its advertising platform has improved click-through rates, further enhancing its pricing power, and despite significant investments in AI, the short-term results indicate strong competitiveness in the advertising market.
- Amazon's Growth Drivers: Amazon's cash flow growth is primarily driven by its ancillary operations, particularly AWS, which is the world's leading cloud infrastructure service platform; the integration of generative AI and large language models has accelerated its growth rate, while its Prime subscription and advertising services continue to show double-digit sales growth, solidifying its market position.
See More
Competitive Advantages of Wall Street's Magnificent Seven
- AI-Driven Growth: Among the Magnificent Seven, Tesla and Apple show poor cash flow forecasts, while Nvidia, Alphabet, and Microsoft are valued between fairly and modestly attractive, highlighting the profound impact of AI technology on company valuations.
- Meta's Advertising Edge: In December, Meta attracted 3.58 billion daily active users, allowing it to charge premium prices for ad placements due to its unique social media assets, and the integration of generative AI has improved ad click-through rates, further enhancing pricing power.
- Amazon's Cash Flow Surge: Amazon's cash flow growth is primarily driven by its ancillary operations, particularly AWS, the world's leading cloud infrastructure service platform, which has reaccelerated its growth rate by incorporating generative AI capabilities, showcasing strong market competitiveness.
- Significant Valuation Discounts: Based on forward cash flow estimates, Meta is valued at a 34% discount to its average cash flow multiple over the past five years, while Amazon shows a 48% discount, presenting attractive investment opportunities in a historically pricey market.
See More
