On Monday, KeyBanc made an adjustment to its price target for Meta Platforms Inc. (NASDAQ: NASDAQ:META), bringing it down to $555 from the previous $575. Despite the reduction, the firm has kept its Overweight rating on the stock. The change reflects a balance between a slightly higher earnings forecast and a lower price-to-earnings (P/E) multiple, now set at 23 times the estimated earnings for 2025.
The analyst from KeyBanc anticipates Meta to report quarterly revenue of $36.1 billion, marking a 26% increase year-over-year, with earnings per share (EPS) at $4.69. These figures are slightly below the consensus for revenue but above for EPS. Looking ahead, the second quarter revenue guidance is estimated to be between $36.8 billion and $39.8 billion, indicating a growth of 15-24% year-over-year. The wide range is attributed to the current macroeconomic uncertainties and the ongoing conflict in the Middle East.
For the full year, KeyBanc expects Meta to raise its capital expenditures by at least $1 billion, potentially up to $3 billion, to support investments in artificial intelligence (AI). Consequently, the firm has increased its EPS estimates for 2024 and 2025 by 2% and 1%, respectively, projecting $21.38 and $24.16 for the two years.
Key factors to monitor include the development of Meta's AI initiatives, such as the expansion of Meta Assistant and the release of Llama 3. The analyst expressed interest in how the company's management will address returns and capital expenditure in light of these advancements. Additionally, advertising revenue growth is under scrutiny, especially with China's advertiser spend in the spotlight amid heightened tensions and the emergence of platforms like Temu. While a 20% year-over-year growth in ad revenue is deemed achievable for the second quarter, there is an expectation of deceleration in growth thereafter.
InvestingPro Insights
With Meta Platforms Inc. (NASDAQ: META) undergoing a price target revision by KeyBanc, investors can gain additional perspective through InvestingPro insights. The company's financial health and market performance are critical for shareholders, especially when considering the firm's strategic investments in artificial intelligence and its advertising revenue trajectory.
InvestingPro data indicates that Meta holds a substantial market capitalization of $1.22 trillion, reflecting its significant presence in the market. Notably, the company's P/E ratio stands at 31.6, which aligns with KeyBanc's analysis of a lower P/E multiple, though it remains above the industry average. This might suggest that investors are expecting higher earnings growth in the future. Moreover, Meta's revenue growth over the last twelve months was a robust 15.69%, signaling a strong performance in generating sales.
From the perspective of InvestingPro Tips, Meta's financial position appears robust, with cash reserves that exceed its debt, providing a cushion for future investments and operations. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, which could signify an attractive entry point for investors who are bullish on the company's profit potential. For those looking to delve deeper into Meta's financials and future outlook, there are 14 additional InvestingPro Tips available, offering a comprehensive analysis of the company's market standing and growth prospects.
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