Meta's one of AI's leaders not a laggard, says Futurum Group CEO Daniel Newman
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Business Insider
an hour ago
- Business Insider
AI-Powered Ads Set to Catalyze Yet Another META Earnings Beat
I've been bullish on Meta Platforms (META) for years, and since it is now my largest holding by far, I am particularly excited about its Q2 results, scheduled for release after tomorrow's market close. After a fantastic Q1 that crushed expectations in late April, Meta's stock has climbed above $100 per share; yet, I believe the stock remains a bargain, given its AI-fueled growth and overall investments to secure dominance in AI. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. For its upcoming results, investors will be eager to see if Meta can maintain its momentum, and given the company's relentless focus on maximizing monetization potential and advertising efficiency, I feel this is going to be another blockbuster quarter. The stock also appears reasonably valued to this day despite the recent share price gains. Thus, I remain firmly Bullish on the stock. Q1 Recap: AI and User Engagement Power Record Results To get a sense of where Meta's coming from heading into its Q2 results, keep in mind that Q1 was nothing short of spectacular, with revenue soaring to $42.3 billion, up 16% YoY, while beating estimates by nearly $1 billion. The company's Family Daily Active People (DAP) hit 3.43 billion, up 6%, showcasing sticky user engagement across Facebook, Instagram, and WhatsApp. AI-driven content recommendations fueled a 5% rise in ad impressions and a 10% increase in average ad prices, with Instagram Reels alone posting 20% year-over-year growth. In the meantime, Meta AI, approaching 1 billion monthly active users and over 3 billion across its app suite, has become a cornerstone of personalized content delivery, enhancing engagement and ad performance. Profitability was equally impressive, with Meta's operating margin expanding to 41% from 38% last year, driven by cost discipline and economies of scale within the Family of Apps segment. Despite Reality Labs posting a $4.2 billion operating loss, the core ad business generated $21.8 billion in operating income, powering a 35% surge in net income to $16.6 billion and a 37% jump in EPS to $6.43, well ahead of Wall Street's $5.25 forecast. One notable contributor here was Meta's notable investment in AI infrastructure, including models like Llama, which continues to optimize ad delivery and user retention, setting the stage for sustained growth without compromising gross margins. What Investors Should Watch Out for in Q2 As Meta heads into its Q2 earnings, Wall Street appears to be filled with optimism, as evidenced by the share price; yet, I would argue that expectations are tempered given the rather conservative estimates. Specifically, consensus projects Q2 revenue of $44.79 billion, only a 14.6% YoY increase, all while EPS is forecasted at $5.86, reflecting 13.5% growth over Q2 of 2024. Now, these figures do align with Meta's guidance of $42.5-$45.5 billion in revenue, supported by a 1% foreign currency tailwind. However, they are pretty conservative in my view, given Meta's ongoing momentum, as well as the fact that Meta has consistently beaten its outlook. In fact, Meta has beaten EPS and revenue estimates nine times in a row and is odds-on to make it ten out of ten this week. Regardless, I will be looking for progress on several key areas. First, the impact of AI on ad performance, primarily through tools like Advantage+ and the subsequent effect on conversions. Second, engagement metrics, especially time spent on Instagram and Facebook, will signal whether Meta's recommendation systems are keeping users increasingly engaged. Third, I will be checking for updates on WhatsApp monetization, with its 100 million business users that could unlock significant revenue potential. Finally, capital expenditure guidance, expected to be $64-$72 billion for 2025, will be scrutinized as Meta ramps up AI infrastructure investments. Valuation: Still a Bargain Despite the Run-Up While entering an earnings report following a rally can raise caution, I believe Meta's valuation still presents a compelling opportunity. At approximately 28x Wall Street's FY2025 EPS estimate of $25.73, the stock looks attractively priced for a company with a track record of 35%+ annual EPS growth—and 37% growth in Q1 alone. According to TipRanks data, META's profit margin has climbed consistently from just above 12% in Q4 2022 to over 36% today. My own forecast places 2025 EPS in the $29–$30 range, supported by continued ad strength, AI-driven efficiencies, and expanding margins. Even based on the Street's more conservative $25.47 estimate, Meta's forward P/E remains below that of peers like Microsoft and Amazon, despite outpacing Apple and Alphabet in earnings growth. Is META a Good Stock to Buy Now? Wall Street remains quite optimistic on Meta, with the stock carrying a Strong Buy consensus rating based on 41 Buy and four Hold recommendations over the past three months. Notably, not a single analyst rates the stock a Sell. However, META's average stock price target of $761.55 suggests a somewhat constrained 6.12% upside from current levels. Meta's AI-Powered Dominance Set to Continue All things considered, Meta continues to execute at an elite level, with strong fundamentals, accelerating AI tailwinds, and a clear path to monetization across its core platforms. While expectations for Q2 are modest, I see plenty of room for upside given the company's track record of consistent outperformance. Between robust engagement, ad efficiency gains, and compelling valuation, I view Meta as one of the best opportunities in large-cap tech today. I'll be watching closely on Wednesday, but my conviction remains Bullish heading into the big announcement tomorrow afternoon.
Business Insider
3 hours ago
- Business Insider
‘Meta Stock Headed for $800': Mark Zgutowicz Weighs In Ahead of Earnings
Meta Platforms (NASDAQ:META) stock has had a solid run since hitting a bottom in April, climbing 44%. Investors have been riding the momentum, but all eyes are now turning to Meta's second-quarter earnings call, scheduled for tomorrow, July 30, after the market closes. And this time, the spotlight won't just be on ad impressions or daily active users – it'll be on something far more ambitious. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. That ambition took center stage in mid-July, when CEO Mark Zuckerberg declared Meta's intention to invest 'hundreds of billions of dollars' into AI infrastructure in pursuit of Artificial Superintelligence. This isn't just about smarter ad targeting or better recommendation engines. We're talking about an all-out arms race to build a future where Meta could rival, or even outpace, the likes of OpenAI and Google DeepMind. To turn that vision into reality, Zuckerberg announced plans to build roughly six gigawatts of data center capacity by 2030. Furthermore, Meta has spent the past month recruiting top-tier AI researchers from OpenAI and DeepMind, while also investing $14 billion in Scale AI and appointing its CEO as Meta's Chief AI Officer. One analyst who's paying close attention is Benchmark's Mark Zgutowicz. While he maintains strong expectations for Meta's Q2 performance and sees promise in the company's evolving monetization strategy through e-commerce and ad pricing, the AI push is where the story really gets interesting. According to Zgutowicz, even though his model already accounts for close to $500 million in capital expenditures through 2030, the real test will be in how well management deploys that capital to generate tangible returns. The analyst also notes that Meta faces stiff competition, pointing to OpenAI's current leadership and Google's entrenched dominance across much of the AI landscape, even before OpenAI's anticipated push into advertising in 2026. As for the upcoming earnings, Zgutowicz expects a 'stable top-line' performance supported by steady e‑commerce trends, continued ad pricing momentum in North America, and higher revenue per advertiser thanks to new Advantage+ attribution tools launched in May. He also projects 2025 capex guidance to remain steady, with operating expenses inching higher to reflect the recent influx of elite AI talent. Looking further ahead, the analyst will be watching for management's tone regarding consensus forecasts that call for 2026 capex and opex growth of 9% and 14%, respectively. With these expectations in mind, Zgutowicz assigns Meta stock with a Buy rating, while raising his price target from $640 to $800. (To watch Zgutowicz's track record, click here) To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.
Yahoo
3 hours ago
- Yahoo
Australia to ban under-16s from YouTube
Australia will use landmark social media laws to ban children under 16 from video-streaming site YouTube, a top minister said Wednesday stressing the need to shield them from "predatory algorithms". Communications Minister Anika Wells said four-in-ten Australian children had reported viewing harmful content on YouTube, one of the most visited websites in the world. "We want kids to know who they are before platforms assume who they are," Wells said in a statement. "There's a place for social media, but there's not a place for predatory algorithms targeting children." Australia announced last year it was drafting laws that will ban children from social media sites such as Facebook, TikTok and Instagram until they turn 16. The government had previously indicated YouTube would be exempt, given its widespread use in classrooms. "Young people under the age of 16 will not be able to have accounts on YouTube," Prime Minister Anthony Albanese told reporters on Wednesday. "They will also not be able to have accounts on Facebook, Instagram, Snapchat, TikTok, and X among other platforms. "We want Australian parents and families to know that we have got their back." Albanese said the age limit may not be implemented perfectly -- much like existing restrictions on alcohol -- but it was still the right thing to do. - Not 'social media' - A spokesman for YouTube said Wednesday's announcement was a jarring U-turn from the government. "Our position remains clear: YouTube is a video sharing platform with a library of free, high-quality content, increasingly viewed on TV screens," the company said in a statement. "It's not social media." On paper, the ban is one of the strictest in the world. But the current legislation offers almost no details on how the rules will be enforced -- prompting concern among experts that it will simply be a symbolic piece of unenforceable legislation. It is due to come into effect on December 10. Social media giants -- which face fines of up to Aus$49.5 million (US$32 million) for failing to comply -- have described the laws as "vague", "problematic" and "rushed". TikTok has accused the government of ignoring mental health, online safety and youth experts who had opposed the ban. Meta -- owner of Facebook and Instagram -- has warned that the ban could place "an onerous burden on parents and teens". The legislation has been closely monitored by other countries, with many weighing whether to implement similar bans. sft/tym/tc
