Oppenheimer, a major financial firm, on Thursday changed its price target for Meta Platforms Inc. (NASDAQ: META), the parent company of Facebook (NASDAQ:), to $500 from $585 previously, while maintaining a rating Outperform on the stock. This revision reflects a valuation of 22 times estimated 2025 earnings per share (EPS), which represents a 16% and 4% discount to its peers and the NASDAQ, respectively.
The company’s analyst cited several reasons for the price target adjustment, including CEO Mark Zuckerberg’s ambition to grow Meta into a leading global artificial intelligence (AI) company . This strategic shift is expected to result in an increase in operating expenses and capital expenditures. Additionally, the recent earnings press conference highlighted Meta’s focus on AI glasses and the Metaverse, as well as the possibility of consolidating parts of its Family of Apps (FRL) with core expenses, which was perceived negatively from the market.
Despite the reduction in price target, the outlook for Meta’s advertising business remains positive. The company’s advertising revenue, particularly from China’s e-commerce sector, continues to look strong, although in the second half of 2024 it may be harder to compare due to a 76% year-over-year increase in 2023. The analyst also noted the expectation of continued improvements in user engagement and ad performance, noting that conversions are growing faster than impressions, resulting in a 28% lower cost per goal when using the tools Advantage+ advertisers.
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Looking ahead, Meta is exploring new revenue streams, such as introducing advertising into messaging and developing enterprise messaging solutions that are expected to have a significant impact in the next year or two. However, the company is not currently working on search ads and is evaluating subscription features for larger models as part of its revenue diversification strategy.
Insights from InvestingPro
As Meta Platforms Inc. goes through a crucial transformation into AI and the Metaverse, Oppenheimer’s price target adjustment brings the company’s financial outlook into sharp focus. Digging deeper into InvestingPro data reveals that Meta holds a significant market capitalization of $1.25 trillion, with a P/E ratio of 32.46, suggesting a higher valuation than current earnings. Notably, the company’s revenue growth over the past twelve months, as of the fourth quarter of 2023, reached a robust 15.69%, indicating healthy expansion across its core business segments.
A tip from InvestingPro points out that Meta is trading at a low P/E ratio relative to near-term earnings growth, which could signal a potentially undervalued stock in the context of its future earnings trajectory. Additionally, 11 analysts have revised earnings upwards for the coming period, suggesting a positive outlook on the company’s profitability. For investors looking to delve deeper into Meta’s financial health and future prospects, there are additional InvestingPro tips that can provide insights into the company’s performance and valuation metrics.
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Those interested in comprehensive analysis and access to exclusive metrics can subscribe to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a one-year or two-year subscription to Pro and Pro+, and learn why Meta’s liquid assets outweigh its short-term obligations and how its cash flows can sufficiently cover interest payments, plus other strategic financial details.
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