DA Davidson analyst Gil Luria initiated coverage on Meta Platforms Inc (NASDAQ: META) with a Buy rating and a price target of $600.
Luria noted Meta Platforms as a top pick within the mega-cap space, with a combination of emerging leadership in the most critical future technology platforms and an attractive relative valuation.
The analyst said Meta Platforms has skillfully positioned itself as the open source leader for major technology platforms: AI Foundation Compute and Spatial Compute.
Unlike previous revolutionary innovations, Luria noted that a mega-cap could only win these two future platforms.
While previous technology innovation was driven by nimble startups, AI and Spatial Computing require unprecedented scale, reach, and capital, the analyst said.
While Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Apple Inc (NASDAQ: AAPL), Amazon.Com Inc (NASDAQ: AMZN), and Microsoft Corp (NASDAQ: MSFT) are crowding into the closed garden side of these platforms, Meta Platforms has the pole position on the open side, Luria noted.
The analyst expects the closed-garden side of the AI compute platform to be an expensive fight between the Big Techs, but he noted that Meta is almost entirely alone on the open-source side.
Google will need to manage the headwind of transitioning to AI-enhanced Search, Meta is already reporting how the advancements in AI are driving better ad delivery and yields, Luria flagged.
In spatial computing, the analyst expects the tens of billions Meta Platforms have poured into Reality Labs to become the moat that positions Meta Platforms as the open-source winner alongside Apple's closed garden.
The analyst said Meta exemplifies the benefits of being led by its founder more than any other mega-cap, including Nvidia Corp (NASDAQ: NVDA).
Luria's price target represents 24x 2025 EPS, a premium to Alphabet based on better positioning. The analyst noted that at 21x, Meta Platforms, aside from Alphabet, is the least expensive mega-cap, even before factoring in the option to sever Reality Lab's losses, which would take the multiple down to 16x, thus providing downside protection.
For Meta Platforms, Luria projected third-quarter revenue of $40.2 billion and EPS of $5.25.
Price Action: META stock is up 0.30% at $506.30 at the last check on Tuesday.