Meta has a key asset in the AI race - and that spurs a new bullish stock call

By Emily Bary

An analyst is upbeat about Mark Zuckerberg's ability to steer Meta ahead of the pack - and potentially help the company become more of a player in the search market

Meta Platforms Inc. has one key advantage as the market assesses the winners and losers of the artificial-intelligence race - and that's Chief Executive Mark Zuckerberg, according to one analyst.

"In a world that is constantly changing, fueled by the rapid development of AI, we feel comfortable that Zuckerberg can successfully navigate Meta to the win," Pivotal Research Group analyst Jeff Wlodarczak wrote Tuesday.

He titled his note to clients, "In Zuck We Trust," as he launched coverage of Meta shares (META) with a buy rating and $780 target price. Wlodarczak also took a bullish view of Alphabet shares (GOOGL) (GOOG).

Wlodarczak is highly upbeat about Meta's product positioning, both now and in the future. "In our opinion, Instagram/Reels/Stories will eventually emerge as the dominant social platform globally (ex-China), partly at the expense of Facebook, given we believe they already have the best product with the ability to layer on new enhancements/products to drive quick uptake," he wrote.

See also: Alphabet's stock has never been this cheap relative to Meta's. How to play that.

Meta's management team stands out in that regard, with a proven ability to react to what peers do in the market and enhance the company's own offerings in the process, according to Wlodarczak.

There are various compelling ways that Meta can make use of AI as well, he noted. For one, Meta can drive cost efficiencies by employing AI in its own business. The company is also putting AI to work as it innovates on the user experience and improves advertising products.

Those efforts are fairly well known on Wall Street. But there's a new possibility for Meta that's not discussed much: "We also believe that their AI infrastructure investment could eventually allow them to take material share in search, which could get a medium-term boost if governments/courts materially check [Alphabet's] chokehold on wireless devices," Wlodarczak wrote.

Alphabet's search business has been deemed a monopoly, and one consequence of that is the company could be required to give up its default search position on mobile phones. That may leave room for others to gain ground in search, where Google has overwhelming market share.

See also: This is where Meta stands out in AI - for better or for worse

-Emily Bary

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10-01-24 2038ET

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