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After The Metaverse Debacle, Meta Is Finally ‘Reeling’ In The Gains!

By TD NewsDesk

TD NewsDesk

Updated on Thu, Aug 31, 2023

Overall Rating
Look who is back with a bang! It’s none other than Meta!

According to a recent report, Meta is back in the limelight and this time, it's winning over investors with a strategic focus on artificial intelligence (AI). #MeticulousMeta

Well, the humble beginning of 2021 had not been that humble as its CEO Mark Zuckerberg's ambitious Metaverse faced a turbulent time. Then, Meta's stock stumbled to new lows in 2022. However, the tech giant seems to have found its footing as it is showing investors that it's a force to be reckoned with.

Analysts who were previously cautious about Meta's prospects are changing their tune. Ken Gawrelski of Wells Fargo Securities LLC recently upgraded his rating on Meta from equal weight to overweight, admitting, "We were wrong on Meta." Now, he views Meta as an accelerating growth story with exciting AI opportunities in messaging, advertising tools and new consumer applications. The company's commitment to AI is becoming increasingly evident and compelling.
Now the question arises: What could be the possible reasons behind this comeback?
  • One of the standout developments is the launch of Threads, Meta's desktop version of a Twitter-like platform. This release only expands the already-dominant position of the company in the social media sector.

  • Moreover, the same report says Meta's shares are increasingly viewed as a play on the future of artificial intelligence, capturing the attention of investors eager to tap into this transformative technology. Meta is becoming a strong contender in the burgeoning field of AI!

  • According to Russ Mould, Investment Director at AJ Bell, "The rally this year has been partly fueled by cost cuts – hiring freezes, job reductions – and a reduction in the capex budget." He further noted, "a tighter focus on where the money goes, so that increased ad revenues provides a faster and more predictable return."

  • This disciplined approach aims to ensure that increased advertising revenues deliver a swifter and more predictable return on investment.

(Hmmm…so this is how Meta's stocks surged on a meta-phorical rollercoaster and investors are loving the ride!)

Let's see how Meta is planning for the future:
  • Despite toning down the metaverse narrative, Meta is projecting substantial spending, with forecasts of up to $30 billion this year and even more in 2024. Notably, the company is emphasizing its investments in AI initiatives, a move that's garnering praise from investors and experts alike.

  • Eric Clark, a portfolio manager at Accuvest Global Advisors, who oversees the Rational Dynamic Brands Fund, which holds Meta stock, appreciates Meta's commitment to AI. He asserts, "I'm fine with the spending, so long as it's not on silly things like the metaverse."

  • Besides, while Meta remains the second-largest spender on Wall Street, trailing only Amazon. Meta is directing investments toward areas with solid growth potential. However, the Reality Labs division, responsible for bringing Zuckerberg's metaverse vision to life, is expected to incur more significant losses this year – but Meta is undeterred. The company is also doubling down on Reels, its short-form video feature on Instagram and Facebook, designed to compete with TikTok. (Yeah, it sounds like a pretty reel-deal for Meta.)

So, as Meta positions itself at the intersection of social media and AI, investors are increasingly confident that its strategic investments will drive robust revenue growth. In a nutshell, the spotlight is again shining on Meta and this time, it's for all the right reasons.

Do you think these moves will help Meta forge into the promising artificial intelligence realm and regain its former glory?

Drop your thoughts in the comments section below!

First published on Thu, Aug 31, 2023

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