Concerns that tech companies like Meta Platforms (META) and Oracle (ORCL) are putting too much debt into the credit market are premature, according to speakers at the Bloomberg Intelligence European credit outlook conference in London. These tech giants have been issuing large amounts of bonds in the U.S. and Europe to help fund massive AI investments, which has led some to worry that the sudden increase in supply could overwhelm the market. But experts at the event said that while the activity has caused some short-term pressure, the overall risk is being overstated.
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Iain Stealey of JP Morgan (JPM) Asset Management explained that the recent bond sales created “a shock and some temporary indigestion” by widening investment-grade spreads by about 10 basis points. However, he noted that companies like Meta and Alphabet generate huge earnings and still maintain very strong balance sheets, which makes their debt relatively safe. In addition, some of their recent deals even offered better-than-usual concessions, which he believes create appealing opportunities for investors.
Stealey also said that future issuance should be more evenly spaced, pointing out that Meta has already signaled that it likely won’t issue again until the second half of next year. Other analysts agreed that big tech remains attractive in the credit market because these firms carry very little debt and hold extremely high credit ratings. Because of this, Bloomberg Intelligence strategist Mahesh Bhimalingam expects strong demand whenever these firms issue new debt.
Is Meta a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on META stock based on 35 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average META price target of $838.14 per share implies 32.3% upside potential.
