The investment case for Meta Platforms gets stronger — and our price target is changing, too

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Meta Platforms ' share gains in the advertising market are poised to accelerate this year, according to new Wall Street research — a rosy prediction that fortifies our investment thesis and suggests additional gains for the stock should be on the way. We're raising our own price target accordingly. Analysts at investment bank Jefferies on Thursday raised their price target on Meta's stock to $585 per share from $550, citing fresh market-share analysis involving "Walled Garden" peers in the digital ad industry: Alphabet' s Google, Amazon , Snapchat and Pinterest . That work indicated "Meta could capture 50% of incremental industry ad dollars in 2024, which would be its highest ever and well above its 33% in 2023," analysts wrote in a note to clients. "In fact, we now estimate that in 2024 Meta's ad business could outgrow Amazon's for the first time since 2015," the firm added. Shares of the Instagram and Facebook parent rose 0.82%, to nearly $511 each, making the stock the top performer in the portfolio Thursday and among the best of any constituent in the S & P 500 . META 1Y mountain Shares of Meta Platforms over the past 12 months. Jefferies' bullish outlook goes straight to the heart of our investment case, which Jim Cramer reiterated last week during the March Monthly Meeting. Meta "has become the premier ad destination for those trying to reach younger people, and that's who all advertisers try to reach," Jim said. "Perhaps more than Google and Amazon, it's getting the money," That didn't happen by accident. After a period of turmoil resulting from Apple's updated privacy practices and TikTok stealing the attention of younger social media users, Meta's efforts to overcome these hurdles are clearly paying off . "Meta has now outgrown its Walled Garden competitors for 5 straight quarters," Jefferies analysts wrote, with the recent rate of market share gains accelerating in the back half of 2023. That momentum is expected to continue thanks to a growing competitive moat rooted in Meta's embrace of artificial intelligence. Meta's heavy investments in AI are paying off for advertisers and boosting user engagement, too. The company's suite of AI-infused ad tools, called Advantage+, "have driven significant improvements in advertiser [return on investment] well beyond competitors," Jefferies wrote. Additionally, Meta is experiencing "impressive momentum" with its click-to-message ads, analysts said, noting that the ad feature — which lets users click an ad on Facebook or Instagram and start a chat with a business on Messenger or WhatsApp — eclipsed a $10 billion-plus run rate in the fourth quarter of 2022. Meanwhile, its short-form video feature to rival TikTok, known as Reels, has seen a 25% increase in user engagement, Jefferies said. And that's before a potential TikTok ban in the U.S., currently being considered in Congress , is implemented. All of this also jives with our view on Meta, as Jim laid out during the Monthly Meeting. As he commented, "Meta Platforms has become a retailer. That's whacky idea that [CEO] Mark Zuckerberg had — I used to talk to him about it about five years ago — of having virtual retailers in a virtual mall is happening at the same time that Reels is taking off." The combination of strong advertiser return and increasing user engagement makes Meta's Facebook and Instagram a natural place for small- and medium-sized businesses to sell their goods. After all, if the eyeballs are already on a platform and you're a company already advertising on there, why not leverage Meta's shopping tools, too? Of course, there's also an opportunity for businesses that have Instagram and Facebook accounts but don't pay for advertising on the apps to begin doing so. Put it all together, and we're aligned with Jefferies on where Meta's stock can go from here. Despite Meta's incredible run since November 2022, during which shares have appreciated nearly 500%, we see more upside ahead. The key reason is Meta's rally has been a fundamental one — based on sales and earnings growth, rather than a technical one driven purely on multiple expansion. As a result, we are increasing our price target to $550 per share from $500, as a premium to where shares have traded in the past is warranted. Meta is pulling away from the digital-advertising pack due to Zuckerberg and Co.'s intense focus on efficiency and investments in AI that are clearly increasing engagement and advertiser return. (Jim Cramer's Charitable Trust is long META, AMZN and GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. Meta headquarters in Menlo Park, California, US, on Thursday, July 21, 2022. David Paul Morris | Bloomberg | Getty Images