On Monday, Evercore ISI maintained a positive outlook on Meta Platforms Inc. (NASDAQ:META), reiterating an Outperform rating with a steady price target of $600.00. The firm anticipates that Meta will outperform expectations for the third quarter, citing a strong internet advertising environment and robust demand and Return on Ad Spend (ROAS) trends specifically for Meta.
The analysis suggests that the current consensus for Meta's third-quarter revenue growth, which is expected to be up 17.6% year over year and 2.8% quarter over quarter, has more potential for an upward surprise. The Street's third-quarter operating margin estimate of 39.2% is also considered reasonable, reflecting a slight decrease from the previous year but an increase from the previous quarter.
Looking ahead to the fourth quarter, Evercore ISI views the Street's revenue growth estimate of 14% quarter over quarter as slightly conservative, given the historical seasonal trends that have shown a sequential revenue growth between 16.1% and 17.5% over the past three years. The firm also expects Meta to maintain its guidance for total expenses and capital expenditures for the fiscal year 2024, as previously outlined in the second-quarter earnings call.
Meta Platforms is set to report its third-quarter results on October 30th. Evercore ISI's revenue forecast of $40.5 billion represents an 18.7% increase year over year, which is slightly above the Street's projection of $40.2 billion. The firm's operating income estimate of $15.7 billion aligns with consensus, implying a 38.7% margin, and the GAAP Earnings Per Share (EPS) estimate of $5.21 is also in agreement with the Street's expectations. The firm does not anticipate Meta providing financial guidance for fiscal year 2025 in the upcoming report, despite some market speculation to the contrary.
In other recent news, Meta Platforms Inc. is developing an AI-based search engine, a strategic move to lessen its dependence on Google and Bing. This initiative could potentially transform how users interact with Meta's suite of products and services, signaling the company's intention to become a more self-reliant entity in the digital ecosystem.
Recently, Meta also announced a partnership with Reuters to integrate its news content into Meta's AI chatbot, marking its first news-related collaboration in several years. The financial terms of this agreement remain undisclosed.
Furthermore, Bernstein has raised its price target for Meta from $600 to $675, maintaining an Outperform rating. The firm's optimism stems from Meta's potential core business prospects, including the anticipated launch of ads on Threads, the ongoing growth of Reels, and the introduction of more AI-driven Advantage+ advertising tools. Bernstein also addressed concerns about Meta's capital expenditure, suggesting the company could achieve a respectable return on invested capital with a moderate increase in core spending while continuing to invest in new ventures.
In the realm of earnings and revenue, Meta along with other tech giants such as Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN) are poised to release their quarterly results. These companies collectively represent a significant portion of the S&P 500's weight, which could substantially impact the broader market indices. These recent developments highlight Meta's strategic efforts to diversify its technological capabilities and strengthen its market position.
InvestingPro Insights
Meta Platforms' strong financial position aligns with Evercore ISI's optimistic outlook. According to InvestingPro data, Meta boasts impressive revenue growth of 24.28% over the last twelve months, surpassing the 17.6% year-over-year growth expected for Q3. This robust growth is complemented by a remarkable gross profit margin of 81.49%, indicating efficient cost management.
InvestingPro Tips highlight Meta's financial strength, noting that the company "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations." These factors contribute to Meta's financial flexibility and ability to invest in growth initiatives, supporting Evercore's positive stance on the company's future performance.
The company's valuation metrics are also noteworthy. With a P/E ratio of 28.81 and a PEG ratio of 0.22, Meta appears to be trading at attractive levels relative to its growth prospects. An InvestingPro Tip suggests that Meta is "trading at a low P/E ratio relative to near-term earnings growth," which could indicate potential upside for investors.
For readers interested in a deeper analysis, InvestingPro offers 17 additional tips for Meta Platforms, providing a comprehensive view of the company's financial health and market position.
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