Meta Shares, Up 177% YTD, Have Attracted Some Big Buyers
Powered by an ongoing rebound in online advertising, shares of Meta in November hit a new 52-week high of $342.92. In Q2 & Q3, a number of big investors did some buying.
Powered by an ongoing rebound in online advertising, shares of Meta (META, $333.17) have advanced 177% YTD. At the new 52-week high of $342.92 reached in November, the stock was up 289% from the November 2022 low of $88.09. At recent prices, the shares trade at 20.7 times the 2024 consensus EPS estimate of $16.10.
In Q2, when Meta traded between a low of $207.13 (April) and a high of $289.79 (June), some large money managers were accumulating the stock. T. Rowe Price was among the biggest Q2 buyers, adding 10.51 million shares. While the mutual-fund giant in Q3 (when the shares traded between roughly $274 and $326) trimmed its stake by 7%, it’s still the #5 holder, with 48.5 million shares.
Fidelity, the #3 holder, bought 3.69 million shares in Q2 and added 5 million shares in Q3. It now owns 130.8 million shares. In Q2, MFS purchased 5.18 million shares, then added 3.09 million shares in Q3, bringing its total position to 8.63 million shares.
In Q2, GQG Partners more than doubled its Meta position with the purchase of 4.48 million shares. In Q3, the firm increased its stake by 32% to 11.13 million shares via the purchase of 2.73 million shares. GQG has more than 60% of its portfolio in the tech sector. Meta is among the firm’s five largest holdings (along with NVIDIA, Microsoft and Alphabet).
Arrowstreet Capital (41% tech weighting) counts Meta among its top three holdings after lifting its stake to 11.6 million shares via the purchase of 3.7 million shares in Q2 and 816k shares in Q3.
Janus Henderson in Q3 lifted its position by 63% to 10.84 million shares with the purchase of 4.21 million shares, while Jennison Associates picked up 2.64 million shares and now owns 11.56 million shares. Also in Q3, Lone Pine Capital and Third Point opened new positions of 2.779 million shares and 1.1 million shares, respectively.
Meta’s advertising business has been in recovery mode all year, with growth steadily bouncing back from the Q4 2022 trough, when ad revenue fell 4.2% year over year. The rebound started to materialize in Q1 2023, with ad revenue advancing 4.1%. Momentum really picked up in Q2 (+11.9%) and then accelerated sharply in the September quarter (+23.5%). Demand has been pretty strong across all major advertiser segments, led by online commerce and gaming.
In Q3, Meta’s total ad revenue of $33.64 billion topped the previous peak of $32.64 billion from Q4 2021. On a geographic basis, the U.S./Canada market (44% of total ad revenue) showed solid Q3 growth of 17%, accelerating from growth of 10.5% in the previous quarter. Europe (23% of ad revenue) was a real standout in the latest quarter, with growth accelerating to 35% from 14% in Q2. Rest of World (12% of total) also performed well in Q3, gaining 36%.
While Meta is definitely benefiting from a general rebound in ad demand, it has also been putting in the work to make its various social media properties more attractive to advertisers. The company is increasingly leveraging AI across its advertising systems and suite of products to drive improved performance for advertisers. It has adopted larger, more advanced ad models and is using AI technology to power ad products that provide increased automation to advertisers.
Meta is quickly gaining significant traction with its Advantage+ shopping campaigns (now at a $10 billion annual run rate) that are part of the Advantage+ product portfolio, which leverages machine learning to assist advertisers in reaching targeted audiences with less set-up time and greater overall efficiency. More than half of all advertisers on Meta’s platform now deploy Advantage+ creative tools to optimize images and text as part of their ad creation process.
In comparison to manual shopping ads, Advantage+ shopping campaigns streamline the whole ad management process, require fewer inputs during the creation of campaigns and offer simplified audience options. Machine learning capabilities help users identify and aim for the highest-value customers across the entire Meta family of apps. Users can automatically test up to 150 different creative combinations to figure out which ads will deliver the highest performance.
Looking ahead to Q4, Meta management said it’s still seeing solid advertiser demand, but macro volatility and recent geopolitical events resulted in the company issuing a wider-than-usual total revenue guide of $36.5 billion to $40 billion, which bracketed the consensus of $38.7 billion. Meta is going up against a relatively easier Q4 comp, so there is ample opportunity for outperformance in the quarter, especially as more advertisers embrace its AI-powered features.
Following the Q3 report, Citi raised its Meta price target to $425 from $385, saying it believes Q4 guidance is likely to prove conservative as the holiday shopping season ramps and AI engagement continues to advance. JP Morgan lifted its target to $420 from $400 based on Meta’s strong product platform and recent focus on operating discipline.