Why This BuzzFeed Analyst Remains Bearish After Stock Skyrockets On Meta Platforms, OpenAI Partnerships

After ripping higher by more than 150% on Thursday, the Buzzfeed Inc BZFD rally continued on Friday with the stock up another 85% in afternoon trading.

One Wall Street analyst said BuzzFeed's new deal with OpenAI may not be as lucrative as the market seems to believe — and investors should consider cashing out on the stock's big gains.

The Buzzfeed Analyst: Bank of America analyst Brent Navon reiterated an Underperform rating on BuzzFeed with a $2 price target. 

The Buzzfeed Takeaways: BuzzFeed's stock took off on Thursday when the company announced a partnership with OpenAI, the startup behind the popular ChatGPT AI platform. The new partnership will reportedly explore AI-generated content creation for BuzzFeed.

In a separate story, BuzzFeed announced it is expanding its partnership with Meta Platforms Inc META to create more content to bring to Meta's social media platforms.

The news sent BuzzFeed's stock skyrocketing this week, and Navon said Friday that the headlines are certainly good for the stock's investor sentiment. Unfortunately, he said it's unlear at this point what impact the deals will have on BuzzFeed's top and bottom lines.

"We do not project the Facebook partnership represents an incremental revenue opportunity for ’23 (likely in existing runrate) and BZFD is only in the early days of experimenting with AI, which could take time before it becomes a material driver of engagement/monetization," Navon said.

For now, Navon said BuzzFeed remains a "show me" story with a lot to prove to investors. In the most recent quarter, BuzzFeed reported 15.1% revenue growth but a net loss of $26.8 million.

Benzinga's Take: Either Navon is completely missing the value AI-generated content could bring to BuzzFeed, or investors are simply buying into the ChatGPT hype a bit too hard.

BuzzFeed's big rally doesn't appear to be driven in large part by a short squeeze given only about 2.3% of the stock's float is held in short positions, according to ORTEX Analytics.

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