Shares of Metaplatforms (NASDAQ: META) boom on Wednesday, gaining as much as 3.1%. At 11:34 a.m. ET, the stock was still up 2.4%.
The catalyst that sent the social media and artificial intelligence (AI) specialist soaring was a vote of confidence from a Wall Street analyst.
Growing AI capabilities
Raymond James Analyst Josh Beck maintained his strong buy rating on the stock, while raising his price target to $550, up from the previous level of $525. That indicates a potential upside of about 15% compared to the stock’s closing price on Tuesday.
The analyst is particularly optimistic about Meta’s moves into generative AI, calling the company a “top pick” thanks to the list of AI building blocks it is assembling. This includes Meta’s growing workforce with AI credentials and its robust computing infrastructure. These support the impressive performance of LLaMA (Large Language Model Meta AI) 3, the large language model that powers Meta AI, “one of the world’s leading AI assistants,” according to the company. The analyst is also impressed with Meta’s ability to build multiple new AI models ‘simultaneously’ without any risk to its core social media business.
The analyst is clearly onto something. In April, Meta unveiled two different versions of LLaMA 3: the 8 billion parameter model and the 70 billion parameter model. Parameters indicate the size of each model and the number of variables used to create it.
Meta’s social media platforms represent a wealth of information on which the AI models can be built, while also providing data for the targeted ads that make up the majority of revenue. The advent of generative AI represents an attractive opportunity for Meta to expand its revenue base, as the company charges major cloud infrastructure services to make the LLaMA models available to their customers.
Only the beginning
Meta is still exploring other ways to leverage its AI expertise and benefit from the AI revolution. At the same time, the company is poised to benefit from the ongoing recovery in the digital advertising market.
Finally, at just 27 times earnings, Meta is a bargain, especially when viewed in the context of the massive opportunity it offers.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Meta Platforms. The Motley Fool holds positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
Why Meta Platforms Stock Rallied on Wednesday Morning was originally published by The Motley Fool
