Chicago, IL – February 20, 2025 – Today, Zacks Investment Ideas feature highlights Meta Platforms Inc. META and NVIDIA Corp. NVDA.
Global social media behemoth Meta Platforms Inc. 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.
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.
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 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.”
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.
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%.
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.
Since 2000, our top stock-picking strategies have blown away the S&P’s +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report