Why We’re Boosting Our Price Target for This Tech Holding
The shares are overbought, so we’re watching these two things as we hope to add to our position.
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*We are boosting our price target on Meta shares to $630 from $575
*Meta’s hardware announcements mesh with our long-term view for Marvell’s non-AI and data center business
*Here’s where we may pick up more META shares
Coming off of Meta’s META "Connect" event on Wednesday, we are boosting our price target on the shares to $630 from $575.
The bulk of the announcements centered on the company’s hardware, including its Orion prototype mixed-reality glasses and the Meta Quest 3 virtual-reality headset. New voice options for Meta’s AI assistant that can be used across its various products were also introduced. Whose voices, you ask? Some of the famous folks include John Cena, Awkwafina, Judi Dench, Keegan-Michael Key and Kristen Bell. Meta also showcased new AI features coming to the Ray-Ban Meta glasses, including recording or sending messages and translating speech in real time.
We found those product announcements interesting and, while some will no doubt jump up and down about them, we’ll take our cues from adoption rates once they are out in the wild. What these products reinforce is that AI will not be limited to PCs, smartphones and tablets. As we see more AI devices being adopted, that usage will continue to feed the virtuous circle of content creation and consumption. That, in turn, will drive network capacity utilization levels higher, which meshes with our underlying thesis for Marvell’s MRVL non-AI and data center business segments.
While those product announcements were pretty much in line with pre-event chatter, what stood out to us was CEO Mark Zuckerberg’s comments about its AI models, including Llama 3.2, which will power new features and allow developers to build their own AI tools. Zuckerberg also shared that Meta’s AI assistant has about 500 million monthly active users, and suggested that it is on track to be the most-used AI assistant by the end of this year.
Putting these announcements together shows that Meta has made meaningful progress on AI as it weaves together voice, video and translation that have the potential to drive greater interaction across Meta’s platforms. Our thinking is that should drive content consumption and advertising revenue as well as margin improvement in the coming quarters.
For now, we’re boosting our META price target to reflect that potential but as we make that move, we also recognize that when investment spend returns to more normalized levels, we’re likely to see even more margin improvement at Meta.
In terms of META shares, they are being lifted by similar price target increases across Wall Street and that is pushing them deeper into overbought territory. That, and only about 10% upside to our new price target, means we’re on the sidelines for now. We see a gap in the chart from earlier this month near $540, and that could be an area of interest for adding some shares.
However, META shares have sold off following management comments about increasing investment spending levels in recent quarters. That could bring an even better opportunity after Meta reports its September quarter results in the coming weeks.
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At the time of publication, TheStreet Pro Portfolio was long META and MRVL.
