On Thursday, Oppenheimer, a prominent financial firm, adjusted its price target for Meta Platforms Inc. (NASDAQ: NASDAQ:META), the parent company of Facebook, to $500 from the previous $585, while retaining an Outperform rating on the stock. This revision reflects a valuation of 22 times the estimated earnings per share (EPS) for 2025, representing a discount of 16% and 4% compared to its peers and the NASDAQ, respectively.
The firm's analyst cited several reasons for the price target adjustment, including CEO Mark Zuckerberg's ambition for Meta to become a leading artificial intelligence (AI) company worldwide. This strategic shift is expected to result in increased operational expenditures and capital expenditures. Additionally, the recent earnings call shed light on Meta's focus on AI glasses and the Metaverse, as well as the potential for consolidating parts of its Family of Apps (FRL) with core expenses, which was perceived negatively by the market.
Despite the reduced price target, the outlook for Meta's advertising business remains positive. The company's ad revenue, particularly from China's e-commerce sector, continues to show strength, although it may face more challenging comparisons in the second half of 2024 due to a 76% year-over-year increase in 2023. The analyst also noted an expectation for ongoing improvements in user engagement and ad performance, highlighting that conversions are growing faster than impressions, resulting in a 28% lower cost-per-objective when using Advantage+ advertising tools.
Looking ahead, Meta is exploring new revenue streams, such as introducing advertising in messaging and developing business messaging solutions that are expected to have a significant impact in the next one to two years. However, the company is not currently working on search ads and is considering subscription features for larger models as part of its revenue diversification strategy.
InvestingPro Insights
As Meta Platforms Inc. navigates through a pivotal transformation towards AI and the Metaverse, Oppenheimer's adjusted price target brings the company's financial prospects into focus. Delving deeper, InvestingPro data reveals that Meta holds a substantial market capitalization of $1.25 trillion, with a P/E ratio of 32.46, suggesting a premium valuation relative to current earnings. Notably, the company's revenue growth for the last twelve months as of Q4 2023 stands at a robust 15.69%, indicating a healthy expansion in its core business segments.
An InvestingPro Tip highlights that Meta is trading at a low P/E ratio in comparison to its near-term earnings growth, which could signal a potentially undervalued stock in the context of its future earnings trajectory. Moreover, 11 analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook on the company's profitability. For investors looking to delve further into Meta's financial health and future prospects, there are additional InvestingPro Tips available that can provide deeper insights into the company’s performance and valuation metrics.
For those interested in gaining a comprehensive analysis and access to exclusive metrics, consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover why Meta's liquid assets exceed short-term obligations and how its cash flows can sufficiently cover interest payments, among other strategic financial details.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.