On Wednesday, BMO Capital Markets updated its outlook on Meta Platforms Inc. (NASDAQ: NASDAQ:META), increasing its price target to $525 from the previous $475, while keeping a Market Perform rating on the stock.
The firm anticipates Meta Platforms may boost creator payouts in 2025 and 2026, estimating an annual figure around $5 billion. This adjustment comes amid observations of fading revenue tailwinds and a weakening in consumer packaged goods and leisure industry verticals.
The analyst from BMO Capital Markets has also adjusted capital expenditure forecasts for Meta Platforms for the year 2025, setting it at $50 billion, which is $4 billion higher than consensus estimates. Despite these concerns, Meta Platforms is expected to benefit from short-term gains driven by political advertising and the current uncertainties surrounding TikTok.
The current market consensus for Meta Platforms' revenue growth in the fourth quarter of 2024 stands at 15%, which is slightly higher than BMO's projection of 13%. According to BMO Capital Markets, Meta's next twelve months GAAP earnings per share multiple is considered to be somewhat overstretched, trading at approximately four turns above its five-year average.
BMO Capital Markets' decision to maintain the Market Perform rating while raising the price target to $525 reflects a nuanced view of Meta Platforms' financial outlook, balancing potential increases in creator payouts and capital expenditures with expected near-term revenue contributions from political advertising and market dynamics influenced by competitors.
In other recent news, Meta Platforms has been the focus of various financial and legal developments. The Court of Justice of the European Union ruled in favor of Austrian privacy activist Max Schrems, stating that Meta can't use personal data for targeted advertising without time restrictions or differentiation between types of data.
On the financial front, Wells Fargo raised Meta's stock price target and anticipates above-consensus earnings for 2025, with revenue forecasts for the third quarter expected to be close to the company's higher end guidance.
Additionally, Meta and Australian banks have collaborated to remove around 8,000 deceptive advertisements from its platforms in response to increased scam reports in Australia. Pivotal Research gave Meta a Buy rating, highlighting the company's expansive user base and successful product development track record. Meanwhile, Monness, Crespi, Hardt raised Meta's 12-month price target, maintaining a Buy rating due to the company's AI and metaverse potential.
InvestingPro Insights
Meta Platforms' financial metrics and market performance offer additional context to BMO Capital Markets' analysis. According to InvestingPro data, Meta's market capitalization stands at an impressive $1.5 trillion, reflecting its dominant position in the tech sector. The company's P/E ratio of 29.36 and adjusted P/E ratio of 27.82 for the last twelve months as of Q2 2024 suggest that while the stock isn't cheap, it's not excessively overvalued given its growth prospects.
Meta's revenue growth remains robust, with a 24.28% increase over the last twelve months and a 22.1% quarterly growth in Q2 2024. This aligns with BMO's expectations of continued growth, albeit at a potentially slower pace. The company's gross profit margin of 81.49% underscores its operational efficiency, supporting an InvestingPro Tip that highlights Meta's "impressive gross profit margins."
Another relevant InvestingPro Tip notes that Meta is "trading at a low P/E ratio relative to near-term earnings growth," which could indicate potential upside despite BMO's concerns about an overstretched earnings multiple. This is further supported by Meta's PEG ratio of 0.23, suggesting the stock might be undervalued relative to its growth rate.
Investors considering Meta's stock might find value in exploring the additional 16 InvestingPro Tips available, which could provide deeper insights into the company's financial health and market position.
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