BuzzFeed Inc.’s stock soared another 73% on Friday to put it on track for a weekly gain of 283%, as analysts weighed in on news relating to a partnership with Facebook and artificial-intelligence initiatives with some bullish comments.
The Wall Street Journal reported on Thursday that BuzzFeed BZFD, -20.70% is planning to leverage ChatGPT and AI to enhance its quizzes and add other personalized content, citing a memo from publisher Jonah Peretti.
“We appreciate the strategic rationale for this enhanced relationship given Buzzfeed’s history of creating ‘viral content’ at a time when the competitive environment is intensifying (e.g. TikTok),” wrote Bank of America analysts led by Brent Navon in a note to clients. ” We view this as a validator of BZFD’s platform as it represents a clear ‘lane’ within the competitive landscape where BuzzFeed can create value by leveraging [its] content creation expertise.”
The Meta partnership could also serve as a template for other third-party platforms to direct business to BuzzFeed, said the note.
Cowen analysts said the news “underscores the ascendance of generative AI,” and noted that ChatGPT can create a “relatively sophisticated explanation of a queried topic, as opposed to a list of links that would typically be produced by a search engine.”
BuzzFeed has already used AI to crate content, Cowen analysts led by John Blackledge wrote in a research note, citing a popular “soulmate” quiz from last July.
BuzzFeed’s quizzes “appear most ripe” for ChatGPT, although there are other potential uses for AI that could help improve engagement, said the Bank of America analysts.
“More broadly, BZFD appears to be bullish on the potential of AI, which it believes could have the same disruptive impact on the content creation/personalization process as algorithmic feeds had on the curation and recommendation of content over the past decade,” the analysts wrote.
Still, the analysts are somewhat taken aback by the magnitude of the stock reaction this week, as the company is still in the early days of experimenting with AI and it could take time before it becomes a material driver of engagement and monetization.
The bank is sticking with its underperform rating on the stock and $2 price target, which is below the stock’s current price of $3.63.
It’s also well below the $10.95 the stock hit when it first started trading after going public via a merger with a special-purpose acquisition corporation, or SPAC, in 2021.
Cowen analysts said they’re also sticking with a $2 share-price target for BuzzFeed as the near-term impact of the recent developments on earnings estimates remains unclear. Cowen has a market-perform rating on the stock.
In December, BuzzFeed said it planned to cut about 12% of its staff, citing a shift to video content and the prospect of a downturn that could extend “well into 2023,” as Peretti told staff in a message.
“Our revenues are being impacted by a combination of worsening macroeconomic conditions, and the ongoing audience shift to vertical video, which is still developing from a monetization standpoint,” he said.
He also said the integration of the entertainment network Complex Networks, which BuzzFeed acquired last year, presented “opportunities to consolidate and centralize some areas where we’ve had duplication.”