Global social media behemoth Meta Platforms Inc. META is benefiting from steady user growth across all regions, particularly the Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver.
META’s artificial intelligence (AI)-driven platform is enhancing ad delivery efficiency and increasing return on ad spend for advertisers. Solid performance in spaces like e-commerce, gaming, entertainment, and media is benefiting Meta Platforms.
Strong Business Execution in Fourth-Quarter 2024
META has shown strong execution of its businesses as fourth-quarter 2024 earnings results handsomely beat both the top and bottom-line estimates. Family daily active people (DAP) was 3.35 billion versus the average estimate of 3.33 billion.
Average Revenue Per Person (ARPP) came in at $14.25 compared to the average estimate of $13.85. Advertising revenues were $46.78 billion compared to the consensus estimate of $45.43 billion. The reported number represents a year-over-year increase of 20.9%.
Instagram has emerged as an important cash cow for META supported by generative AI. The growing popularity of Reels has been a driving force. The company is using AI to recommend roughly 40% of the content that users see on Instagram.
Messenger and WhatsApp are extremely prized possessions of Meta platforms. Ephemerality and end-to-end encryption have driven the popularity of WhatsApp. The rapid adoption of WhatsApp Business by small and mid-sized enterprises is noteworthy. Moreover, increased communication enhances chances of META penetrating the lucrative payments market.
Significant Leverage on Artificial Intelligence
Meta Platforms is leveraging AI to effectively connect people through Facebook, Instagram, WhatsApp, and Messenger. The company is exploring chat experiences in WhatsApp and Messenger, visual creation tools for posts on Facebook and Instagram and ads. Gradually, META is expected to introduce AI for video and multi-modal experiences. Meta believes AI tools will improve business messaging experience and customer support.
On July 24, 2024, META unveiled its Llama 3 AI model. Using NVIDIA’s latest HDX H200 chip that supports Meta Platforms’ Llama 3 AI model, an investment of $1 by an API provider can generate $7 in revenues over the next four years. This mostly free Llama 3 model and its advanced version to be released next year aim to compete with incumbents like Open AI.
META said that currently 4 million advertisers are using the company’s generative AI tools to create ads, up from 1 million six months ago. NVIDIA Corp.’s NVDA next-generation AI chip, called Blackwell, is the upcoming driver. META to get B200 Blackwell chips. Meta Platforms saw higher retention rates among advertisers using generative AI-powered image expansion, and background and text generation tools.
META is set to spend $60-$65 billion on AI infrastructure in 2025 compared with $50 billion expected earlier. According to CEO Mark Zuckerberg, "Investing very heavily in capital expenditure and infrastructure is going to be a strategic advantage over time."
Meta Platforms is trying hard to ensure that its next-generation open AI platform Lalma 4 becomes the best platform in this space. Zuckerberg said “Llama 4 will be natively multimodal — it's an omni-model — and it will have agentic capabilities, so it's going to be novel and it’s going to unlock a lot of new use cases.”
Solid Estimate Revisions for META Stock
For first-quarter 2025, the Zacks Consensus Estimate currently shows revenues of $41.44 billion, suggesting an improvement of 13.7% year over year and earnings per share (EPS) of $5.61, indicating an increase of 19.1% year over year.
The Zacks Consensus Estimate for first-quarter 2025 earnings has improved 4.1% over the last 30 days. META reported positive earnings surprises in the last four reported quarters with an average beat of 13.8%.
At present, the Zacks Consensus Estimate indicates a year-over-year increase of 14.6% and 11.7%, respectively, for revenues and EPS in 2025. The Zacks Consensus Estimate for 2025 earnings has improved 5.9% over the last 30 days.
Even after this upward revision, the current Zacks Consensus Estimate for 2026 revenues and EPS reflects an upside of 13.3% and 13.2%, respectively. The Zacks Consensus Estimate for 2026 earnings has improved 6% over the last 30 days.
Image Source: Zacks Investment Research
Attractive Valuation of META Shares
Meta Platforms currently carries the forward P/E of 27.63X for the current financial year, compared with 29.86X of the industry and 18.88X of the S&P 500. META has a return on equity of 38.17% compared with -0.62% of the industry and 16.94% of the S&P 500 Index. META currently has a long-term (3-5 years) EPS growth rate of 18.3%, well above the S&P 500’s long-term EPS growth rate of 12.3%.
At present, the short-term average price target of brokerage firms for the stock represents an increase of 0.9% from the last closing price of $716.37. The brokerage target price is currently in the range of $935-$505. This indicates a maximum upside of 30.5% and a maximum downside of 29.5%.
Image Source: Zacks Investment Research
META Shares Flying High Year to Date
Meta Platforms is witnessing an impressive rally in 2025 significantly outperforming other members of the “magnificent 7” group. Year to date, the stock price of META has jumped 22.2% compared with the 4.5% gain of the S&P 500 and 3.9% of the Nasdaq Composite. The other six stocks have been underperforming these two indexes.
Meta Platforms has a strong balance sheet and generates significant cash flow, which makes it an attractive stock for investors. As of Dec 31, 2024, cash & cash equivalents and marketable securities were $77.82 billion and long-term debt was $28.83 billion.
META currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Meta Platforms continues to invest in developing its platform and products. We believe that its ability to generate strong cash flows will help it to make further investments in product development and acquisitions in the future.
The chart below shows the price performance of the ‘magnificent 7’ stocks year to date.
Image Source: Zacks Investment Research
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpNVIDIA Corporation (NVDA) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
