Facebook parent Meta stock surges 8% on AI-powered ad sales booster

Meta shares surged nearly 8 per cent on Thursday as a rosy revenue forecast showed that artificial intelligence was helping the social media giant boost engagement and ad sales even in an uncertain economy.
 

The Facebook owner was set to add about $60 billion to its market value after strong second-quarter earnings encouraged 18 analysts to lift their target price on a stock that has already more than doubled this year.
 

“Meta (is) in a class-of-their-own in digital ads," said Mark Shmulik of Bernstein, adding that its “monster guidance blew the doors off with an expected growth rate of +15-24 per cent numbers investors were hoping to see as early as Q4.” 
 

While Meta’s 12 per cent rise in second-quarter ad revenue surpassed the 3 per cent growth at Alphabet's Google, earnings reports from both the digital ad behemoths reinforced a recovery in the sector. Meta and Google are on track to add around $160 billion to their combined market capitalisation — a figure that is more than the individual market values of about 90 per cent of the companies in the S&P 500 index. Smaller rival Snap, however, disappointed on ad sales as advertisers stick to tried and true platforms.
 

Meta’s results were also supported by improving monetisation of Reels, a short-form video format that is the company’s answer to TikTok. 
 

CEO Mark Zuckerbergsaid Reels now has an annual revenue run rate exceeding $10 billion, up from $3 billion last fall.
 

“Advertisers are gaining confidence in Meta’s enhanced and AI-powered campaign planning and measurement capabilities, and spending more. Unsurprisingly, Reels monetisation keeps improving,” said Morningstar analyst Ali Mogharabi.

The positive analyst view reinforces how a focus on cost cuts and higher engagement through AI has helped Meta turn into a Wall Street darling this year after being derided for much of 2022 for its hefty spending on the ambitious metaverse.Analysts have a median price target of $355.50 on Meta, which represents an upside of 19 per cent to its stock’s last close.