Facebook could jump 18% as its ambition to build a 'metaverse' that hinges on creators and commerce will drive profits, BofA says

• Facebook's ambitions to build a "metaverse" will help boost its stock price, BofA said.
• Following Facebook's earnings, BofA upgraded its price target to $425, 18% higher than Wednesday's close.
• BofA praised Facebook's ambitions to build a metaverse through investing in VR, creators, and commerce.

Facebook's ambitions to build a virtual environment or "metaverse," will help boost the tech giant's profits and stock price, said Bank of America.

Following Facebook's second-quarter earnings, a team of BofA analysts led by Justin Post upgraded their 2021 price target to $425, a roughly 18% gain from Wednesday's close.

The analysts highlighted that Facebook is investing heavily in projects that will build an impressive "metaverse" online.

"It's a virtual environment where you can be present with people in digital spaces. You can kind of think of this as an embodied internet that you're inside of rather than just looking at," Zuckerberg said of the metaverse during Facebook's earnings call.

Some of Facebook's investments to build out the "metaverse" include investing in creators through tools like Reels, Bulletin, and Live Audio where users can consume and create content. The tech giant is also investing in commerce, through Shops and Marketplaces. BofA said Facebook is also investing in a VR computing platform, with Quest 2 generally "doing well," the analysts said.

"These efforts are part of a larger goal to build a virtual environment - a metaverse. FB is already investing billions in Oculus and other AR/VR initiatives, making current core margins more impressive," said BofA."

Bofa analysts reiterated their "buy" rating for the stock and also raised expectations for Facebook's 2022 earnings after the tech giant beat expectations in the second quarter of 2021.

Shares of Facebook were down 3% mid-morning Thursday.