Here’s What Analysts Have to Say According to Investing

Meta Platforms significantly outperformed market expectations for its second-quarter revenue, leading to a positive outlook for the third quarter. This suggests that strong spending on digital advertising across its social media platforms is helping to offset the costs associated with its investments in artificial intelligence (AI).

For the quarter ending June 30, Meta announced earnings of $5.16 per share, with revenue reaching $39.07 billion. These figures exceeded projections of $4.70 per share and $38.26 billion in revenue. Additionally, the number of daily active users rose to 3.27 billion, reflecting a 7% increase from the previous year.

Following the positive earnings report, Meta’s shares surged by 7% in premarket trading. Capital expenditures for the second quarter amounted to $8.47 billion, up from $6.72 billion in the first quarter. Although operating costs rose by 7% in the second quarter, the significant revenue growth led to a 9-point increase in the operating margin, now at 38% compared to 29% earlier.

Looking forward, Meta anticipates total revenue in the range of $38.5 billion to $41 billion for the third quarter, averaging $39.75 billion, which exceeds Wall Street’s estimate of $39.09 billion. The company also indicated that it would continue substantial investment in AI infrastructure, projecting capital expenditures for 2024 to be between $37 billion and $40 billion, an increase from its earlier guidance of $35 billion to $40 billion.

Meta has kept its forecast for total expenses for the year between $96 billion and $99 billion but cautioned that infrastructure expenses will continue to be a major contributor to cost growth in 2025.

Following the earnings report, many analysts expressed an optimistic view of Meta’s stock, raising their price targets. Analysts from Citi mentioned that they felt increasingly positive after the second-quarter earnings, noting improvements in user engagement and monetization, while also highlighting expanding margins. They raised their target price for the stock from $550 to $580.

JPMorgan analysts stated Meta has “earned the right to invest significantly in GenAI,” given its promising revenue outlook and clearer AI product roadmap. They set a price target for Meta stock at $610 by December 2025, raising it from the previous target of $480 for December 2024.

Other firms also echoed positive sentiments. Evercore ISI noted that the stock’s aftermarket increase of 7% was justified by Meta’s impressive ad revenue growth, ongoing product improvements, and considerable margin expansion. They emphasized that Meta’s AI initiatives have effectively enhanced its offerings for both consumers and advertisers and that the stock remains attractively valued.

Citizens JMP commented that while Meta’s AI investment phase is ongoing, the company is well-positioned for continued growth due to its vast user base and streamlined advertising processes. Similarly, Morgan Stanley highlighted how Meta’s use of data analysis through AI has led to significant improvements in engagement and revenue growth.