Meta Platforms(US:META) Guotai Junan Securities·2024-09-23 13:13Investment Rating - The report assigns a "Buy" rating to Meta (META.O) with a target price of $577 [6] Core Views - Meta's AI-driven advertising business is showing strong growth, with AI-powered content expected to account for over 30% of Meta's applications by 2024 [6] - The company's Reality Labs division is strategically focused on efficiency improvements, with AI tools like Meta AI and AI Sandbox empowering the Family of Apps (FoA) for new growth [54] - Meta's social empire is well-established, with a mature layout and continuously strengthening moat [54] Financial Projections - The report forecasts Meta's GAAP net profit for 2024-2026 to be $53.83 billion, $62.49 billion, and $69.12 billion, respectively, with corresponding P/E ratios of 26X, 23X, and 20X [6] - Meta's revenue is expected to grow from $160.28 billion in 2024 to $200.99 billion in 2026, with a CAGR of 10.24% [7] - AI-driven revenue is projected to account for 32%, 40%, and 50% of total revenue in 2024, 2025, and 2026, respectively [30] AI and Advertising - Meta's AI tools, such as AI Sandbox and Advantage+, are enhancing advertising efficiency, with Advantage+ Shopping improving ROI by 22% for US advertisers [6] - The company's generative AI recommendation system (GRs) has shown a 12.4% improvement over traditional systems, driving better ad performance [23] - By 2028, Reels' annual advertising revenue is expected to reach $118.6 billion, driven by increased user engagement and ad load rates [20] VR/AR and Reality Labs - Meta's Quest series has established a leading position in the VR market, with Quest 2 being the most popular VR product [36] - The VR/AR market is expected to grow significantly, with revenues projected to reach $40.4 billion in 2024 and $62 billion by 2029 [32] - Reality Labs' revenue grew by 28% YoY in Q2 2024, driven by strong sales of Quest 3, although the division remains unprofitable [41] AI and AR Glasses - Meta's Ray-Ban Meta smart glasses, developed in collaboration with Ray-Ban, have sold over 1 million units and are expected to see rapid growth with the launch of Llama 4 in 2025 [43] - The global smart glasses market is in its early stages, with shipments expected to grow from 1.01 million units in 2023 to 4.14 million units by 2025 [49] - In conservative, neutral, and optimistic scenarios, the smart glasses market size could reach $9.1 billion, $91 billion, and $182.1 billion, respectively [49] Valuation and Target Price - The report values Meta at 28X 2024E P/E, resulting in a target market capitalization of $1.5073 trillion and a target price of $577 [55] - Meta's historical P/E ratio from 2019-2023 is 26.25X, reflecting its stable profitability and leading position in the global social media market [55]