On Friday, Wolfe Research adjusted its outlook on Meta Platforms Inc. (NASDAQ: NASDAQ:META), increasing the price target from the previous $670.00 to $730.00. The firm maintained an Outperform rating on the social media giant's shares, which currently commands a market capitalization of $1.51 trillion.
According to InvestingPro data, Meta's stock is trading near its 52-week high of $638.40, reflecting strong market confidence. The adjustment comes as Wolfe Research analysts express a positive stance on the company's future financial performance, expecting that Meta will exceed current Street estimates.
The analysts at Wolfe Research have articulated several core components of their thesis supporting the raised price target. They believe that the integration of video across Meta's platforms is not fully appreciated by the market, predicting that this could lead to a meaningful upside to the 2025 Street estimates by mid-single-digit billions of dollars.
Meta's current financial performance supports this optimistic outlook, with InvestingPro showing impressive revenue growth of 23% and industry-leading gross margins of 81.5%. Additionally, they anticipate the Threads messaging app could contribute low-single-digit billions to Meta's revenue with monetization efforts starting in 2025.
Another potential growth factor identified is the uncertain future of TikTok. Should a divestiture occur, Wolfe Research sees an 8 to 10% increase in Meta's earnings per share (EPS). The firm also highlights Meta's advancements in artificial intelligence (AI), suggesting that the company's multi-year investments are now well-positioned to demonstrate potential returns on invested capital (ROIC).
While acknowledging the risks associated with larger-than-expected capital expenditures (CapEx) in 2025, Wolfe Research estimates Meta's CapEx to be around $58 billion for that year, which is higher than the Street's $50 billion projection.
The analysts believe that the stock might experience limited movement until there is greater confidence in the market regarding the impact of these investments on Meta's profit and loss statements.
Notably, InvestingPro analysis indicates Meta maintains a "GREAT" financial health score, with strong cash flows and robust returns on invested capital of 27%. Despite this, Wolfe Research is prepared to endorse an increase in CapEx in light of their optimistic view on Meta's core ranking and algorithm improvements.
In other recent news, Meta Platforms has made significant strides in its growth strategy, with several analyst firms expressing confidence in the company's future. JMP Securities maintained a Market Outperform rating, increasing the price target for Meta to $750, citing advancements in artificial intelligence (AI) and messaging as key growth catalysts.
Similarly, RBC Capital and Canaccord Genuity held positive stances on Meta, raising their price targets to $700 and $730 respectively, recognizing the company's AI investments and growth prospects in ad creative generation and business messaging.
The company also announced the appointment of Joel Kaplan as its new Chief Global Affairs Officer. Kaplan, who replaces Nick Clegg, is expected to oversee key responsibilities including Facebook's content policy and elections. These are recent developments that have made headlines, providing insights into the dynamic environment in which Meta operates.
Analysts predict that Instagram, a Meta property, will constitute half of Meta's advertising revenue in the U.S. by 2025. Despite facing a $264 million fine from the Irish data protection commission over a data breach, analysts from Truist Securities expressed a positive outlook on Meta's prospects for 2025.
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