On Monday, Wells Fargo has increased the stock price target for Meta Platforms Inc. (NASDAQ: NASDAQ:META) to $625, up from the previous $593, while keeping an Overweight rating on the stock. The firm adjusted its forecast based on indications of a strong second-quarter advertising performance, despite increased foreign exchange headwinds. The expectation is that the third-quarter guidance will be positive.
The analyst noted that after the second-quarter earnings call, investors might have a more optimistic view of the company's revenue and margins for 2025. Consequently, the analyst has revised the forecast for second-quarter and full-year 2024 foreign exchange advertisement revenue growth to 22.4% and 20.2%, respectively, up from 21.0% and 19.1%.
Moreover, there has been a slight increase in the projected operating expenses for fiscal years 2024 and 2025. The new estimates are $96.5 billion and $107.1 billion, marking a 0.4% and 0.3% increase from the previous predictions. These changes are due to minor depreciation and amortization revisions.
The updated forecast for GAAP earnings per share (EPS) for fiscal years 2024 and 2025 is now $21.66 and $26.27, a slight decrease from the earlier estimates of $21.71 and $26.50. The firm reiterates its Overweight rating and bases the updated price target on a 20 times estimate of the company's projected 2026 earnings per share.
The analyst pointed out that when accounting for the losses of the Facebook Reality Labs (FRL) division at 10 times, the implied price-to-earnings ratio for Meta's core business in 2026 based on the updated price target would be 15 times.
In other recent news, Meta Platforms has seen its stock target raised to $570 due to consistent advertising growth, as noted by Wedbush. The company has reported an increase in growth from advertisers for the fifth consecutive quarter, with 43% of advertisers reporting a growth of 10% or more during the second quarter. This trend is expected to continue, with about 44% of advertisers planning to increase their spending by more than 10% year-over-year in the third quarter.
In other recent developments, Meta Platforms is under scrutiny in the European Union for alleged non-compliance with the bloc's Digital Markets Act (DMA) regarding its advertising model. If found in breach of regulations, Meta could face a significant fine. The company is also considering blocking news content on its platform in Australia to avoid new licensing fees proposed by the Australian government.
The U.S. Supreme Court has vacated previous court decisions related to social media laws in Florida and Texas, instructing lower courts to reevaluate these rulings. This development could have implications for Meta and other social media companies.
In the broader market context, the upcoming earnings season is expected to be a key determinant of the stock market rally, with investors keenly watching the profit growth of various companies, including Meta Platforms. The Wells Fargo Investment Institute advises investors to potentially capitalize on the energy, healthcare, industrials, and materials sectors.
InvestingPro Insights
Following Wells Fargo's upbeat assessment of Meta Platforms Inc. (NASDAQ: META), the latest data from InvestingPro aligns with the positive outlook on the company's financial health. With a robust market cap of $1.35 trillion and a P/E ratio standing at 29.71, Meta's valuation reflects its significant presence in the tech industry. Notably, the company's gross profit margin for the last twelve months as of Q1 2024 impressively sits at 81.5%, underscoring Meta's efficiency in maintaining profitability despite market challenges.
InvestingPro Tips highlight several strengths for Meta, including its ability to hold more cash than debt, suggesting a solid balance sheet. Moreover, the company's gross profit margins are not only impressive but also indicative of its competitive advantage in the Interactive Media & Services industry. For investors looking for more depth, there are 15 additional tips available on InvestingPro, which can be accessed with the use of coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
As Meta trades near its 52-week high, with a price 97.68% of that peak, the company's recent performance and the optimistic projections for its advertising revenue growth resonate with the confidence expressed by analysts. The InvestingPro platform, with its real-time data and comprehensive analysis, serves as a valuable resource for investors seeking to make informed decisions on stocks like Meta Platforms Inc.
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