Meta Platforms is the IBD Stock Of The Day as its shares have formed a bullish cup-with-handle base. The Facebook parent is hosting its annual Connect conference next week, where analysts expect it to detail its metaverse and artificial intelligence efforts.
Meta stock has risen 148% this year, as of Friday's close. On the stock market today, shares climbed 1.1% to 299.08. The stock's new cup-with-handle base has a buy point of 312.87, according to IBD MarketSmith charts.
However, a rise above its Sept. 20 high of 308.06 could offer an early entry point. But investors should practice caution with the market in correction.
Meta Stock: AI, Metaverse At Connect
Meta's two-day Connect virtual conference kicks off Wednesday. The company will unveil the third generation of its virtual-reality headset.
"Connect has typically been a virtual reality-driven event and the official launch of the Quest 3 will be a highlight, but we also expect an update and possible launch of Meta's first consumer-facing gen-AI (generative artificial intelligence) solutions," Loop Capital analyst Rob Sanderson said in a client note Friday.
Loop Capital holds a 375 price target for Meta stock, implying roughly 25% upside.
Separately, a report from Citi on Friday set a 385 price target for Meta and identified the Connect conference as a potential catalyst.
Chief Executive Mark Zuckerberg used the 2021 Connect conference to announce the company's name change from Facebook to Meta. The change highlighted his belief that the company's future is in the metaverse.
But the metaverse has often been a drag on Meta stock. That was especially true last year when Meta stock lost two-thirds of its value. Challenges to Meta's core social media advertising business brought scrutiny to the billions it is spending on the metaverse with little payoff.
Looking For AI Plans
Instead of the metaverse, Meta's turnaround this year has been driven by cost-cutting and a recovery for ad sales. The company also is seen as a beneficiary of the artificial intelligence boom. Meta has developed its own large-language model to power AI applications. Further, the company has used AI to develop new advertising products for businesses.
Beyond that, Zuckerberg hinted on the company's second-quarter earnings call in late July that details on its AI work are coming at Meta Connect.
The Financial Times reported in August that Meta is preparing to introduce chatbots within its social media platforms. Analysts like that idea.
"Longer term, we also see the potential launch of AI-powered agents in WhatsApp, Messenger and Instagram which could further increase the search and shopping capabilities of these applications," Morgan Stanley analyst Brian Nowak wrote in a Sept. 6 client note.
Morgan Stanley has a 375 price target for Meta stock.
Augmented Reality A Bridge To The Metaverse?
Also, analysts are watching for Meta to push more augmented reality, or AR, products. AR apps overlay virtual effects or information with the physical world, without requiring a fully immersive headset.
Meta recently announced that parts of Horizon Worlds will be available on smartphones and the web.
"We expect augmented reality to become a bigger focus of (Meta), providing a bridge to metaverse content and participation through AR apps accessible on over 5 billion smartphones in use today," Loop Capital's Sanderson wrote.
Further, Meta believes it can balance AI investments with its effort to develop the metaverse.
"Our investments in AI continue," Zuckerberg said on the company's July-earnings conference call. "We remain fully committed to the metaverse vision as well. We've been working on both of these two major priorities for many years in parallel now, and in many ways the two areas are overlapping and complementary."
At this point, the company's strong financial results are helping buy time for that vision. For the full year, analysts expect Meta to post an adjusted earnings increase of 40% to $18.33 per share, according to FactSet. Also, full-year revenue projections from analysts see Meta notching $132.49 billion in sales for the year, up 14% from last year.
Meta Stock Technical Ratings
Meanwhile, Meta shares boast a near-perfect IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one. The best growth stocks have a Composite Rating of 90 or better.
Further, Meta's Relative Strength Rating is 98 out a best-possible 99. The rating measures how a stock's price movement over the last 52 weeks compares with that of other stocks in IBD's database.
Meta stock has an Accumulation/Distribution Rating of B-. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
