Shutthiphong Chandaeng
Meta Platforms (META) is BofA’s top pick among large-caps for the online media sector in 2024, with the brokerage preferring Pinterest (PINS) among mid-caps.
BofA raised META’s PT from $384 to $405, and PINS’ PT from $37 to $42.
The brokerage prefers Meta (META) due to the Facebook-parent’s “under-appreciated” AI capabilities, increasing monetization of messaging assets, ongoing Reels monetization cycle, and solid overall usage trends around video.
Bofa added it chose Pinterest (PINS) due to the image-sharing platform’s Amazon (AMZN) deal, possibility of further margin/EBITDA upside due to strong cost discipline, and exposure to a rebound in the depressed home furnishing ad category.
Brokerage expects the global online ad industry to grow 12% to $629 billion in 2024, boosted by improving macro conditions, increasing short form video monetization, and AI driven improvements in ad targeting and measurement.
“2023 was a year of recovery for the Online media sector after significant spending cutbacks and ATT changes weighed on growth in 2022,” noted BofA.
According to BofA, the top sector themes for 2024 include increasing shot form video monetization (Reels, Shorts, Spotlight), improving ad performance due to AI/ML investments, evolution of LLM based search results, new social media and ecommerce partnerships, and a modest growth boost from U.S. elections and Olympics.
BofA also highlighted the risks the sector could face in 2024 due to Google (GOOGL)(GOOG) phasing out cookies and implementing privacy sandbox, emerging competition from ecommerce platforms, streaming platforms, and TikTok.
Brokerage added slowing growth in online ad spending, regulatory uncertainty, and margin pressure due to an increased focus on generative AI could also threaten the sector in 2024.