Meta Platforms (META) basically told investors that the company will have to spend money now but that it will pay off in the long run. Meta Platforms seeks to develop its AI-enabled products, so shareholders should be patient. I am bullish on META stock and consider it to be appropriate for most people’s portfolios.
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Meta Platforms owns the social media platforms Facebook, Instagram, and Whatsapp. In the age of AI, it’s important for Meta Platforms to embed its products with the latest and greatest in AI functionalities.
Sure, Meta Platforms has been developing AI features for a while, and the company wants its shareholders to know that the AI efforts are paying off. However, Meta Platforms’ management knows that the company has much more work to do and more money to spend in this area. Investors should understand this and allow Meta Platforms to continue its research and development, as this will be a win-win for the company, customers, and shareholders.
Words of Warning About Meta Platforms’ AI Spend
There’s a lot of great news about Meta Platforms to reveal. However, today, we’ll start off with some words of warning from Meta Platforms CFO Susan Li. She made it crystal clear that the company expects to spend profusely on AI technology.
For this year, Li anticipates that Meta Platforms’ 2024 capital expenditures (CapEx) will be in the range of $37 billion to $40 billion, updated from the company’s prior prediction of $35 billion to $40 billion. Thus, it appears that Meta Platforms is already spending more than previously anticipated.
What about next year? Meta Platforms is likely to ramp up its spending, as Li anticipates that “infrastructure costs will be a significant driver of expense growth next year as we recognize depreciation and operating costs associated with our expanded infrastructure footprint.”
Here’s the real kicker, though. Li stated outright that she expects “significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.” It’s not every day that a mega-cap company directly admits that it’s going to spend a “significant” amount of capital.
It’s understandable if you like to invest in businesses that demonstrate capital discipline. On that topic, Raymond James analyst Josh Beck believes that Meta Platforms’ “disciplined investment philosophy” is paying off. Beck also feels that Meta Platforms’ core advertising business is outperforming and is already “benefiting from AI.” For example, Beck observed that Meta Platforms’ AI enables its users to ask questions and interact more deeply on the company’s platforms.
That’s a fair point, so there’s no need to lose sleep worrying about Meta Platforms’ expected AI spend. It’s probably just a case of Meta Platforms having to spend more money now in order to stay competitive and make a boatload of money later on.
Meta Platforms Stock Jumps on Strong Results
Instead of worrying about Meta Platforms’ expected capital outlays in 2025, why not celebrate the company’s victories in 2024? Meta Platforms delivered excellent top-line and bottom-line results in this year’s second quarter, and as a result, META stock zoomed higher today.
Here’s the scoop: Meta Platforms’ Family of Apps revenue (this includes revenue from Facebook, Instagram, WhatsApp, and Messenger) came in at $38.72 billion in Q2 of 2024. That was above the consensus estimate of $37.7 billion — so far so good.
Furthermore, Meta Platforms generated total revenue of $39.071 billion, marking a noticeable improvement over the $31.999 billion from the year-earlier quarter. Meanwhile, Wall Street’s consensus estimate called for the company to have generated $38.3 billion in Q2-2024 revenue, so that’s another beat.
Finally, Meta Platforms earned $5.16 per share in 2024’s second quarter, handily surpassing the analysts’ consensus forecast of $4.74 per share. Even the most worrisome of worry warts can’t easily argue with these outstanding results from Meta Platforms.
Is Meta Platforms Stock a Buy, According to Analysts?
On TipRanks, META comes in as a Strong Buy based on 24 Buys, two Holds, and two Sell ratings assigned by analysts in the past three months. The average Meta Platforms stock price target is $549.35, implying 10.8% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell META stock, the most profitable analyst covering the stock (on a one-year timeframe) is Brad Erickson of RBC Capital, with an average return of 68.65% per rating and a 74% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Meta Platforms Stock?
If you don’t already have enough exposure to AI technology, investing in Meta Platforms isn’t a terrible idea. After all, the company is already deploying AI functionalities across its social media platforms and is generating strong revenue and income.
In other words, you don’t have to fret about Meta Platforms’ anticipated ramp-up in 2025 CapEx. It’s the cost of doing business and staying ahead of competitors, so I would consider buying META stock today.
