Meta Platforms stock traded flat Thursday, despite positive views from analysts on the AI and metaverse related products that the Facebook parent company announced at its Connect conference.
Analysts came away mostly bullish following Chief Executive Mark Zuckerberg's keynote presentation. But Meta stock watchers are balancing excitement about AI and smart glasses with questions about how much they will cost.
That's particularly true for the metaverse-focused Reality Labs division, which posted an operating loss of more than $8 billion in the first six months of this year compared to revenue of $793 million.
"Overall, we find the enhancements to be exciting and they build on Meta's existing ecosystem of hardware/software capabilities across the metaverse," CFRA analyst Angelo Zino wrote to clients late Wednesday. "Still, we see no path to profitability for its Reality Labs segment, as we expect $15 billion-$20 billion in segment losses this year, and question whether elevated investments on the hardware side will reap investor value over time."
On the stock market today, Meta stock closed a fraction lower at 567.84. Shares gained roughly 1% Wednesday to close at 568.31, briefly climbing to a record high of 576.88.
Meta Stock A Top AI Pick For Jefferies
The first day of the Meta Connect developer conference featured announcements for a lower-cost Quest 3S virtual reality headset, new celerity voices and other features for it AI chatbot and a preview of Meta's Orion augmented-reality glasses. Zuckerberg also revealed that the Meta AI chatbot has exceeded 500 million monthly active users.
"On the consumer (side), we're bullish on Meta AI's impressive traction and see potential in new image, translation and voice capabilities to boost core engagement," Jefferies analyst Brent Thill wrote. "On the enterprise, Llama is becoming a serious contender and we see momentum building with its new multimodal capabilities. Meta = one of our top AI picks."
Thill rates Meta stock a buy.
Meta told investors in July it will spend up to $40 billion on capital expenditures this year. Jefferies' Thill acknowledged there could be a "lag" between those investments and revenue related to the new products.
"Meta's new products – Llama and Meta.AI, which it is investing deeply in – have yet to be monetized," Thill wrote. "That said, we are confident in Meta's proven ability to successfully scale and monetize new products (e.g. mobile, Reels, Stories), which we expect Meta will be able to do with AI."
Will Investors Buy Into Metaverse Vision?
Similarly, Oppenheimer analyst Jason Helfstein viewed the focus of this year's event as more interesting in the long-term for Meta.
"Short term, we think the event was less impactful than last year, which focused on integration of AI into the core business and improving ROI for advertisers," Helfstein wrote in a Wednesday client note. "This year, CEO Zuckerberg spent more time discussing the company's work with Ray-Ban and (a) fully holographic glasses demo."
The metaverse has never been popular among investors. Steep losses for Reality Labs contributed to Meta's deep slump in 2022.
Since then, the strength of Meta's advertising business has helped the stock make a convincing comeback. But Reality Labs is still a long way from profitability.
William Blair analyst Ralph Schackart noted, however, that Meta's Ray-Ban smart glasses are gaining traction.
"While we do not believe this will change investor perception overnight for its Metaverse vision, we do believe the incremental product enhancements seem usable," Schackart wrote to clients Thursday. "Moreover, the Orion prototype provided incremental future use-cases, in our view."
Meta Stock: Extended Past Buy Zone
With its action Thursday, Meta stock is hovering near the top end of a 5% buy range from a 542.81 consolidation pattern buy point identified by MarketSurge.
Meta stock has gained more than 60% this year. The rally trails only Nvidia for the best performance among the Magnificent Seven stocks.
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