Meta AI advancements impress Jefferies, boosting stock potential By Investing.com

On Thursday, Jefferies, a global investment banking firm, raised its price target for Meta Platforms Inc. (NASDAQ: NASDAQ:) shares to $600 from the previous $565, while maintaining a Buy rating on the stock. The adjustment follows Meta’s reported revenue growth and the introduction of new advertising tools.

The company’s second-quarter revenue growth, excluding foreign exchange effects, was 23% year-over-year, surpassing Wall Street’s expectations by 2%. Additionally, the guidance for third-quarter revenue suggests an 18% growth at the midpoint, excluding foreign exchange considerations, which is notably more optimistic than anticipated given a 9 percentage point tougher comparison from the previous year.

Meta’s recent announcement that over one million advertisers have utilized its Generative AI advertising tools in the past month was highlighted as a significant development. This figure represents approximately 10% of Meta’s total advertiser base, indicating a swift uptake of the new technology among marketers.

In response to these developments, Jefferies has increased its capital expenditure estimates to account for the increased investment in AI technology. Despite this, the firm expresses confidence in Meta’s ability to generate a meaningful return on invested capital (ROIC), citing the company’s proven track record.

The new price target of $600 is based on 24 times Jefferies’ projected earnings per share (EPS) for the fiscal year 2025. This valuation reflects the investment firm’s optimistic outlook on Meta’s future financial performance and growth prospects.

In other recent news, Meta Platforms Inc. has been the focus of several analyst notes. Jefferies and Guggenheim both raised their price targets for the company to $600, maintaining a Buy rating, while RBC Capital held steady with an Outperform rating and a price target of $570. These adjustments come after Meta reported a robust second-quarter performance, with revenue growth of 23% year-over-year, reaching $39.1 billion, surpassing both its own and Wall Street’s expectations.

The outlook for third-quarter revenue is set between $38.5 billion and $41.0 billion, indicating a continued positive trajectory. Analysts have emphasized Meta’s strong advertising business and growing user engagement as key drivers of this growth. Moreover, the company’s significant investments in artificial intelligence (AI) technology, including the introduction of new advertising tools used by over one million advertisers, are expected to further enhance the platform’s value.

However, the increased investment in AI has led to a rise in capital expenditure estimates, with Jefferies and RBC Capital adjusting their projections accordingly. Despite this, both firms expressed confidence in Meta’s ability to generate a meaningful return on invested capital. These are recent developments that highlight Meta’s strategic efforts to position itself for long-term success in the rapidly evolving tech landscape.

InvestingPro Insights

As Meta Platforms Inc. continues to impress the market with its strategic initiatives and financial performance, InvestingPro data underscores several key metrics that may interest investors. With a market capitalization of approximately $1.2 trillion, Meta’s valuation reflects its significant presence in the tech industry. The company’s gross profit margin stands at an impressive 81.5% for the last twelve months as of Q1 2024, highlighting its ability to efficiently manage costs relative to revenue.

InvestingPro Tips also shed light on Meta’s financial health and potential for growth. Notably, Meta holds more cash than debt, providing a cushion for future investments or economic downturns. Additionally, the company is trading at a low P/E ratio relative to its near-term earnings growth, which could suggest that the stock is undervalued given its earnings trajectory. These insights, along with the fact that 8 analysts have revised their earnings upwards for the upcoming period, may provide investors with a more nuanced perspective on Meta’s value proposition.

For those seeking a deeper analysis, there are 13 additional InvestingPro Tips available that could further inform investment decisions. These include insights on profitability, industry positioning, and return on investments. Prospective investors can explore these tips by visiting the dedicated Meta section on InvestingPro.

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