On Thursday, Citi maintained a Buy rating on Meta Platforms Inc. (NASDAQ: NASDAQ:META) stock and increased its price target from $645.00 to $705.00. The firm highlighted the company's strong advertising revenue growth and the successful impact of its artificial intelligence (AI) investments.
Meta's advertising revenue saw a year-over-year increase of 20% excluding foreign exchange impacts. This growth was attributed to a 7% rise in ad impressions and an 11% increase in pricing. Citi's analysis suggests that Meta is capturing a larger share of overall advertising budgets.
The firm also noted significant engagement improvements on Instagram (IG) and Facebook (FB), which were driven by Meta's AI recommendation engine. This underscores the return on investment from the company's AI efforts, with Citi believing that this area still has considerable potential for growth.
Further commenting on Meta's financials, Citi observed a 250 basis point expansion in family of apps (FoA) operating income margins, which reached 54.0%. This margin growth helped to balance the increased reality labs (RL) expenses, which rose by 19% year-over-year. The firm credited the margin expansion to Meta's enhanced organizational efficiency and productivity.
Despite anticipating a rise in capital expenditure in 2025, Citi remains confident in Meta's strategic focus on near-term, mid-term, and long-term opportunities. The firm encourages investors to consider any share price dislocation as an opportunity. With these factors in mind, Citi reiterated its Buy rating and raised the price target to $705.00.
In other recent news, Meta Platforms and Microsoft (NASDAQ:MSFT) have expressed concerns regarding increased investments in artificial intelligence (AI), causing a ripple effect among investors. Despite surpassing earnings expectations, both companies forecasted a need for greater AI investments, which has led to a wave of caution in the market. Analysts from AJ Bell and D.A. Davidson have noted the potential impacts of these investments on company performance and margins.
In the midst of these developments, Meta Platforms reported a third-quarter revenue of $40.6 billion, a 19% year-over-year increase, exceeding expectations. The company also reported an Operating Income of $17.4 billion with a 43% margin, surpassing consensus estimates. Meta's Daily Active People (DAP) across its family of apps saw a 5% year-over-year increase, albeit slightly below the Street's forecast.
Financial services company Stifel maintained its Buy rating on Meta Platforms with a price target of $663, following these results. Similarly, Goldman Sachs reaffirmed its Buy rating on Meta, maintaining the stock's price target at $636. These assessments followed the release of Meta's third-quarter earnings which showed revenues slightly surpassing Wall Street estimates.
In the face of these financial developments, Meta announced a partnership with Cornerstone OnDemand Inc., a workforce agility solutions firm, to enhance immersive learning and extended reality applications through AI. This collaboration aims to make these technologies more accessible within corporate settings. These are part of the recent developments surrounding Meta Platforms and Microsoft.
InvestingPro Insights
Meta Platforms Inc.'s strong performance, as highlighted by Citi's analysis, is further supported by real-time data from InvestingPro. The company's revenue growth of 24.28% over the last twelve months aligns with Citi's observations on advertising revenue increases. Moreover, Meta's impressive gross profit margin of 81.49% underscores its operational efficiency, which Citi noted in the expansion of family of apps operating income margins.
InvestingPro Tips reveal that Meta "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations," indicating a robust financial position that supports the company's ongoing investments in AI and other strategic initiatives. Additionally, the tip that "9 analysts have revised their earnings upwards for the upcoming period" corroborates Citi's optimistic outlook on the company's future performance.
For investors seeking a deeper understanding of Meta's financial health and growth prospects, InvestingPro offers 17 additional tips, providing a comprehensive view of the company's market position and potential.
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