This Monday's IBD Stock of the Day is Meta Platforms (META). In response to a rumor indicating that it is in talks to supply Apple (AAPL) with its AI models, Meta stock is moving up approaching a possible buy mark.
The talks were first reported by the Wall Street Journal early on Sunday, citing anonymous sources. The article claims that even though the agreement has not been sealed, Apple may include Meta's AI models into its newly revealed Apple Intelligence devices. Using its own algorithms and collaborations, Apple intends to include a number of AI-powered capabilities into the iPhone and other products. As the firms revealed earlier this month, the first such agreement is with ChatGPT parent company OpenAI.
In early trading on the stock market today, Meta stock is up over 1% to $502.46. Based on MarketSurge charts, shares are getting close to a purchase point of 514.01 cups with handles.
Apple's AI Plans
A partnership with Meta may enable Apple to provide consumers with a wider selection of AI choices, according to a Wall Street Journal article. But it might also contribute to making Meta's AI initiatives more well-known. Llama 3, the most recent AI model from Meta, was unveiled in April by CEO Mark Zuckerberg. Building the "world's leading AI" is his stated goal.
However, following the company's first quarter report in April, investors punished Meta shares, partly due to apprehensions about the potential costs of the AI effort.
The discussions are noteworthy because Apple and Meta are well-known to be fierce competitors, particularly in the market for virtual reality headsets. Additionally, Meta's capacity to sell targeted ads on Facebook and Instagram in 2022 was severely curtailed by a change to Apple's iPhone privacy policies.
Zuckerberg is approaching AI from an open source perspective by providing its products at no cost. The business just linked Facebook and Instagram with its Meta.ai chatbot. The Journal article pointed out that it is uncertain how big of a financial bonanza a collaboration with Apple would deliver.
It is also said that Apple has discussed using its models with Alphabet, the parent company of Google (GOOGL). Additionally, the Wall Street Journal reported on Sunday that Apple and the AI firms Perplexity and Anthropic are in talks.
Meta Stock: Q1 Letdown
According to MarketSurge, Meta stock created a cup-with-handle pattern after falling by about 2% last week.
Supported by promises for its first-ever dividend and solid fourth-quarter profitability, Meta stock shot out to a roughly 40% gain at the beginning of 2024. However, after Meta's first-quarter earnings release, shares fell 10.5%. When Meta revealed plans to increase capital expenditure spending while providing revenue projections for the second quarter that was lower than anticipated, investors became uneasy.
Still, a lot of Wall Street analysts support Meta. In a recent client note, Bernstein analysts admitted that there is a bearish argument for Meta stock given that revenue growth is slowing down relative to more difficult comps from a year ago. However, there are also causes for hope.
According to Bernstein analyst Mark Shmulik, "a robust digital ad market together with newer ad solutions like click-to-message and Advantage+ generative AI ad creative usage should combine to overcome the predicted harder comps in the second half of 2024." Crucially, we think Meta can manage the direction of revenue growth this year by combining powerful macrotailwinds with internal company initiatives.
Meta's upcoming test will be included in its second quarter report, which is expected to be released in late July. According to FactSet, analysts are projecting a 57% increase in Meta's earnings to $4.69 per share for the company's June-ending quarter. Sales are expected to reach $38.2 billion, up 19%.
Meta Stock: Near Buy Zone
On Monday, shares briefly rose over Friday's peak of 503.54, providing a possible early entry.
Meta stock has a Relative Strength Rating of 93 out of a possible 99 according to the IBD Stock Checkup tool. This suggests that over the last 12 months, the stock outperformed the majority of the market.
IBD Stock Checkup further reports that Meta stock has the best-possible IBD Composite Rating of 99. According to the score, Meta stock now outperforms almost all other stocks in terms of technical strength and important performance indicators.
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