Meta Stock Investors Eye Connect Event for Potential Rally Catalyst

Meta stock bulls look for next rally catalyst

What Meta showcases could be the next potential catalyst for the mega cap technology stocks as investors assess the longevity of the AI trade. Some still doubt the payoff from heavy spending by companies on this industry craze and, while Meta has shown that big outlays on AI are yielding results, capital expenditure remains under scrutiny. In recent years, the Connect event hasn't immediately triggered large stock swings, but it has foreshadowed Meta earnings releases heading into the fourth quarter. Two years ago, the gathering showcased a new headset and updates on the Metaverse, just ahead of a damaging earnings release where investors balked at Meta's high spending on the technology. Last year, Meta announced AI initiatives, including its Meta AI assistant and a slew of AI chatbots on social media. About a month later, investors again showed their displeasure at Meta's quarterly results, as it warned about economic headwinds for advertising purchases while continuing to invest heavily in AI and virtual reality. The mood is a little different this time round. Meta seems to have convinced investors - at least for now - that it will keep seeing payoff for pouring money into new technology. During the last earnings call, Mr Zuckerberg made the case that spending on AI is helping improve Meta's core business, spurring gains in its shares that outpaced its mega cap peers. "The Connect conference has been more of a pivotal event for Meta, not because of the products itself, but more so from what Zuckerberg has been saying from a holistic fundamental perspective," said David Wagner, a portfolio manager at Aptus Capital Advisors. Wall Street has long been bullish on Meta shares, but the Facebook owner has lately attracted increased analyst attention. Cantor Fitzgerald and DA Davidson initiated coverage of Meta this month with buy-equivalent ratings. Cantor Fitzgerald analyst Deepak Mathivanan also named the company a top pick with "further potential for upward estimate revisions and an attractive valuation," in a September 4 note. Meta's valuation partly explains why investors are still buying at record highs. The company trades at about 24 times forward earnings, roughly in line with its 10-year average and a discount to the 26-times ratio for the Nasdaq 100. It's also cheaper than the approximately 29 times commanded by the magnificent seven index. "It's not what I would consider an expensive stock," Mr Sansoterra said. "But it is a stock that is clearly growing better than investors thought, even a few quarters ago." After attracting some new bulls, Meta's average price target is at a record high of about $5US74, implying about 3 per cent further upside.

Meta Stock Bulls Look to 'Connect' Event for Next Rally Catalyst

Meta Platforms Inc. investors have already had a rewarding year. Now, their attention is on an event this week for insights into where the stock's record-breaking rally is heading next. Meta's annual Connect conference kicks off Wednesday, with industry buzz around the reveal of a prototype augmented reality eyewear product, plus the usual star turn by Chief Executive Officer Mark Zuckerberg. Attendees will want to hear the CEO's latest updates on artificial intelligence applications and investment.