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Meta’s Q1 Earnings: Most Analysts Support AI Strategy, While One Says ‘Use Meta As A Source Of Funds,’ Questions Its Long-Term Value


Meta Platforms Inc (NASDAQ:META) reported its first-quarter 2024 earnings, revealing a revenue of $36.45 billion, which surpassed analyst estimates.

Despite this positive revenue performance, Meta Platforms’ shares declined by 15% in after-market trading due to lower-than-expected revenue in the first quarter and a slightly disappointing outlook for the second quarter, coupled with increased expenses and capital expenditure forecasts for 2024.

Read: Meta Platforms Stock Is Tumbling Thursday: What’s Going On?

Meta expects operating losses for its Reality Labs division to significantly rise year-over-year. Mark Zuckerberg, Meta’s founder and CEO, expressed optimism, citing progress in AI development and metaverse building efforts.

Here’s what analysts have said about the earnings report.

JPMorgan On Meta

Analyst Doug Anmuth reiterated his Overweight rating on Meta while reducing the price target from $535 to $480 a share.

“Meta is more optimistic & ambitious on AI than ever, and believes it can become the leading AI company in the world,” said Anmuth.

To this end, Meta’s management anticipates challenges in the coming months, including tough comparisons from 2023 regarding China advertiser spending, Reels monetization and engagement trends. Despite these challenges, Meta remains optimistic about its AI initiatives, believing they will yield significant long-term benefits.

“We are encouraged that Meta’s success w/Llama 3 and Meta AI has increased management’s confidence in leading in AI,” he noted.

The company’s strong competitive position, focus on user experience and strategic alignment with AI and the metaverse suggest a promising future, per Anmuth.

Despite the increased spending, analysts project double-digit revenue and EPS growth for Meta in 2025 and 2026, given its history of driving returns on investment.

Wedbush On Meta

Analyst Scott Devitt had an Outperform rating on Meta. Devitt too, reduced his price target on the stock from $570 to $480 a share.

Meta is “in the early stages of a multi-year investment cycle to support metaverse and AI initiatives that will
likely take several years to scale adoption and monetization,” said Devitt.

Wedbush has adjusted its profit forecasts to account for Meta’s accelerated expense growth and increased capital expenditure in the coming years. For the near term, Devitt thinks “the setup will be challenging” and sees limited upside.

On a relative basis, Wedbush favors Alphabet Inc.’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google (Outperform, Best Idea), within the group.

Needham On Meta

Analyst Laura Martin had an Underperform rating on Meta and no price target. Her recommendation: “use Meta as a source of funds,” implying investors should sell the stock as opposed to buying it.

Martin is skeptical about buying Meta stock for several reasons.

  • Meta’s management suggests it is in a two- to three-year investment cycle before revenue growth materializes, which raises concerns about the stock’s potential.
  • The reliance …

Full story available on Benzinga.com

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