Meta Platforms ($META)

Shares of social media giant Meta Platforms have rallied by a phenomenal 107% year-to-date. The company impressed investors by returning back to revenue growth in the first quarter (after three straight quarters of decline) despite subdued digital ad spending due to macro pressures.

Investors have also cheered the company’s aggressive cost-cutting and streamlining efforts, including thousands of layoffs. Despite the distraction caused by regulatory matters, most Wall Street analysts remain optimistic about Meta’s prospects.

Meta’s user base continues to expand, with daily active people (number of users who visited at least one of the family apps –Facebook, Instagram, Messenger, and WhatsApp in a day) growing 5% year-over-year to 3.02 billion (on average) in March. The company expects capital expenditure of $30 billion to $33 billion this year toward the build-out of its artificial intelligence (AI) capacity to support ads, Feed, and Reels as well as increased investment in generative AI initiatives.

Is Meta a Good Stock to Buy?

On Tuesday, Piper Sandler analyst Thomas Champion reiterated a Buy rating on Meta Platforms stock with a price target of $270 after taking a deep look at the company’s AI capabilities.The analyst sees the company leveraging AI to boost user engagement, develop better and more automated advertiser tools, and create an open-source AI ecosystem. Champion is also optimistic about Meta’s positioning within the digital ads space.

Amazon ($AMZN)

Like Meta, Amazon is also reducing its costs to navigate a tough business backdrop. The company’s retail business has been under pressure due to the impact of macro challenges on consumer spending. Additionally, the slowdown in the growth rate of the higher-margin Amazon Web Services (AWS) business has also been concerning. Enterprises are moderating their IT budgets, which is weighing on AWS’s growth.

Wall Street continues to be bullish on Amazon and sees solid potential in the retail and AWS divisions over the long term. Moreover, AMZN’s rapidly growing advertising business is also expected to boost revenue in the years ahead. Despite macro pressures, Amazon’s ad revenue increased 23% year-over-year to $9.5 billion in Q1.

Is AMZN a Buy, Sell, or Hold?

Earlier this week, Mizuho analyst James Lee increased his price target for Amazon to $160 from $145 and reiterated a Buy rating, calling the stock his top pick for the second half of 2023. The analyst expects multiple expansion as concerns about the company’s AI market position “diminish.”

Recent channel checks by Lee’s firm with a leading channel partner indicated that AWS’s generative AI demand has been accelerating due to the ease of transition and product differentiation.

“Case studies show that AWS wins over clients on intelligence privacy and data security,” said Lee. Further, he also highlighted that generative AI is priced meaningfully higher than conventional computing, so it is expected to be both revenue and margin accretive to AWS. Consequently, Lee believes AWS revenue growth will likely trough in Q2 before rebounding in the second half of the year.

Netflix (NASDAQ:NFLX)

Netflix’s crackdown on password sharing has improved investor sentiment about the streaming giant. Password sharing has been a key concern for Netflix, especially as competition has become intense in the streaming space. Netflix had previously estimated that over 100 million households share accounts, representing 43% of its global user base. This week, Netflix rolled out its password-sharing crackdown to its home market.

Aside from the password-sharing crackdown, Netflix’s business is expected to improve through its recent introduction of a cheaper, ad-supported tier.

What is the Price Target for Netflix?

On Thursday, Oppenheimer analyst Jason Helfstein increased the price target for Netflix stock to $450 from $415 and maintained a Buy rating in reaction to the launch of paid sharing offering at $7.99 per additional household stream.

Prior to the announcement, the analyst’s firm conducted a survey of 1,800 U.S. Netflix consumers. The survey indicated a healthy propensity to pay for “remote” users, with certain abandoned users willing to pay for their own subscriptions.

While 45% of respondents indicated a willingness to pay for “remote” users, 70% indicated an inclination for the $6.99 ad-tier plan. With pricing of the paid sharing option above the ad-tier, the survey suggests a significant portion of these users will be pushed toward the ad-based offer.

Conclusion

Wall Street is more bullish on Meta Platforms and Amazon compared to Netflix. Given the massive rally in Meta stock, Wall Street sees higher upside potential in Amazon stock from current levels. Analysts mainly see solid potential in Amazon’s AWS cloud business, supported by solid demand for cloud computing and prospects for growth in the AI space.