Shares of Facebook parent company Meta Platforms (META) have pushed higher in recent weeks to chase all-time highs, following a strong second quarter earnings report. Meta stock has gained nearly 50% this year, following up a 194% gain in 2023 that helped the social media giant recover from a deep slump in 2022.
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These Magnificent Seven Stocks Have Earnings Due As Techs Sell Off
Meta rejoined the ranks of trillion-dollar market cap tech companies at the start of the year. Its shares are still highly rated among Wall Street analysts. But there are challenges ahead for the tech giant to build on its growth.
Last month, some investors began rotating away from the group of Magnificent Seven tech stocks, which includes Meta. Meanwhile, Meta Chief Executive Mark Zuckerberg is pledging to spend tens of billions on infrastructure to power the company’s AI ambitions, as well as its metaverse-focused business. And Meta will be lapping increasingly difficult year-over-year quarterly comparisons for its digital advertising revenue, which still drives nearly all the company’s sales.
Still, Meta’s second-quarter results impressed and investors seem ready to give Zuckerberg space to spend big on efforts he says are vital to the company’s future.
So is Meta stock a buy? Here’s what to know about recent news and action involving Meta stock:
Meta Stock Chasing July High
Meta stock opened trading on Wednesday, August 14, slightly higher, near 530. Shares are working back toward a record high of 542.81 reached in intraday trading on July 8.
The Facebook parent company slumped after reaching the new territory in early July. Meta stock fell to a three month low at 442.65 on July 25. The slide came as the broader group of Magnificent Seven stocks have struggled. The group – which includes Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOGL), Amazon (AMZN) and Tesla (TSLA)– shed more than $1 trillion in market cap over a five day span last month. Some investors rotated out of outperforming big tech stocks and into other markets as confidence increased about a rate cut.
Meta stock jumped 4.8% on August 1, following a second-quarter earnings report that beat expectations for sales and earnings. Shares were knocked back a bit after that by a weak U.S. jobs report on August 2 that sent markets tumbling.
But investors are back to pushing Meta higher. Meta stock decisively overtook both its 50-day and 21-day moving averages on Aug. 8. The stock is on track to have a shallow cup base next to a prior base after this week, with a buy point at the 52-week high of 542.81.
Meta Q2 Tops Expectations
Meta stock rallied at the start of the month on the social media giant’s strong second quarter earnings.
As reported by the company on July 31, revenue in the June-ended quarter advanced 22% year-over-year to $39.07 billion. That was better than the $38.26 billion in sales analysts were forecasting, according to FactSet.
Earnings were $5.16 per share, up 73% from a year earlier. Analysts were expecting $4.72 per share, according to FactSet.
Meta also forecasted roughly $39.75 billion in revenue for its September quarter, ahead of analyst expectations of $39.1 billion in sales for the company’s Q3.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” Zuckerberg said in the company’s earnings release. “We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”
Zuckerberg Details AI Push
Zuckerberg unpacked Meta’s AI strategy on a conference call with analysts to discuss the Q2 results. With the report, Meta told investors it expected to spend between $37 billion and $40 billion on capital expenditures this year, up from its previous range of $35 billion to $40 billion. The company also said it expects “significant capital expenditures growth” for 2025.
“We are in the fortunate position where the strong results that we’re seeing in our core products and business give us the opportunity to make deep investments for the future,” Zuckerberg said on the company’s earnings call.
Those investments will focus mostly on building advanced data center capacity to support training and deploying AI algorithms. Investors are increasingly anxious about when the significant costs of training and operating AI models will payoff for tech giants. Meta also upped its capex forecast when it gave first quarter results in late April. At that time, the increased spending was enough to send Meta stock sharply lower.
But Zuckerberg appeared to settle investors by detailing how AI is already boosting Meta’s business. The company’s Meta.ai assistant is growing and AI is already improving content recommendations within Facebook and Instagram, Zuckerberg said.
Longer term, Zuckerberg expects the company can offer fully automated advertising plans to businesses.
“Advertisers will basically just be able to tell us a business objective and a budget and we’re going to go do the rest for them,” Zuckerberg said on the analyst call.
The results and commentary helped fuel optimism that Meta willbe an AI winner.
“Looking for returns on aggressive industry AI spend? Look no further,” Evercore ISI analyst Mark Mahaney wrote to clients following the report. “Meta has already effectively deployed AI to materially boost its consumer offerings (measured by rising user growth and deepening engagement) and its advertiser offerings (measured by rising return on advertising spend and ad spend). And there is much more to come.”
Meta Stock: AI Push
Meta’s AI plans revolve around its Llama open-source large language models. The AI algorithm is available freely to developers and also powers a chatbot across Meta apps that Zuckerberg called the “most intelligent AI assistant that you can freely use.”
Meanwhile, Meta has also launched AI-powered advertising and messaging tools for businesses. AI is also powering what the company has described as a new recommendation engine for videos on Facebook and eventually across Meta’s apps, Facebook leader Tom Alison said at a Morgan Stanley investor conference earlier this year.
Meanwhile, Zuckerberg on July 23 announced availability for the newest version of Meta’s Llama AI model. Zuckerberg called open source AI the “path forward” in a blog post.
Meta Stock: Regulation Watch
Another factor to watch for Meta is regulation. On July 1, European regulators said Meta is violating digital competition rules by only allowing users to opt-out of ad tracking on Facebook and Instagram by paying for a subscription product. Meta launched paid, ad-free versions of Facebook and Instagram late last year. It was an attempt, the company said, to comply with the EU’s Digital Markets Act, which placed tighter restrictions on what big tech companies can do with user data.
But the European Commission said Monday that the paid model does not comply with the law. Meta will have a chance to respond to the preliminary findings.
Meanwhile, there is growing scrutiny on the effects of social media on children. In an op-ed in late June, U.S. Surgeon General Vivek Murthy said that social media products should come with a warning label about their effect on mental health for young users, similar to the warnings for tobacco products.
The surgeon general’s concerns are similar to those voiced in a lawsuit filed by leaders from 42 U.S. states in October. That lawsuit alleged Facebook and Instagram harnessed “technologies to entice, engage, and ultimately ensnare youth and teens.”
Meta is also facing an antitrust challenge from the Federal Trade Commission. The FTC sued back in December 2020, alleging Facebook had abused monopoly power in acquiring competitors Instagram and WhatsApp. The original lawsuit was dismissed in 2021, but the FTC filed an amended lawsuit later that same year.
In April, Meta filed to have the lawsuit dismissed ahead of a potential trial. “The FTC has failed to state a plausible claim, and the agency has done nothing to build its case through the discovery process to prove otherwise,” the company said.
Meta Stock: Wall Street Projections For 2024
Analysts remain bullish on Meta. Of the 67 analysts following the stock, 84% rate Meta a buy, according to FactSet. Those analysts have calculated an average target price for Meta stock of 568.78, according to FactSet, implying 8% upside from Meta’s closing price on August 13.
For the full year, analysts project that Meta’s revenue will rise 19.6% to $161 billion in 2024, after climbing 15.7% last year, according to FactSet. Revenue slipped 1.1% in 2022.
Meta’s earnings are expected to grow this year but at a slower rate compared to Meta’s 2023 recovery year. Analysts project the Facebook parent company will post earnings of $21.23 per share in 2024, up 42.7% from 2023, according to FactSet. Earnings increased 73% year-over-year in 2023.
Advertising Leader
Despite its push into AI and the metaverse, social media advertising remains the heart of Meta’s business. About 98% of its revenue is from advertising on its “Family of Apps.” The category includes Facebook, Instagram, Messenger, Reels, WhatsApp and Threads.
It’s a massive empire, with more than 3 billion global users.
The most recent survey from Pew Research Center found that 67% of Americans use Facebook, while 47% use Instagram. Meanwhile, 35% of Americans said they use Pinterest (PINS), 33% use TikTok, 30% use Microsoft-owned LinkedIn and 27% use Snapchat, according to Pew.
The huge user bases for Facebook and Instagram, paired with an AI-powered advertising sales platform, help Meta dominate social media advertising. Research firm eMarketer estimated at the start of the year that Meta will capture 21.9% of all U.S. digital advertising sales in 2024. Only Google has a bigger projected share, with 27.4%. Amazon is third, with 8.5% of the market.
What Would A TikTok Ban Mean For Meta?
Something else to watch for Meta stock: One of its biggest competitors could be banned from the U.S. On April 24, President Joe Biden signed into law a bill that requires TikTok’s Beijing-based owner ByteDance to sell the app or it will be banned.
Lawmakers and others in favor of a TikTok ban view the short-video app as a potential security threat and fear user data could be shared with the Chinese government. There are also concerns that TikTok’s algorithmic content recommendations could be used to shape public opinion among U.S. users. Meanwhile, those against the potential ban, or forced sale, say the idea violates free speech rights. Further, TikTok’s ownership denies that it is controlled by the Chinese government.
On May 7, ByteDance sued to block the law. The company has said it will not sell the app.
Zuckerberg has previously acknowledged TikTok as a “very effective competitor.” Instagram and Facebook compete against TikTok for user attention, plus advertiser dollars. Meta launched its own short-video product, Reels, late in 2021 in response to TikTok’s rapid rise in the U.S.
But it will be worth watching what a potential Trump presidency means for the TikTok ban. He has said he does not support the idea, particularly because it would weaken competition for Meta’s Facebook and Instagram.
Meta’s Metaverse Spending Still Growing
Where else is Meta spending big? The metaverse. Remember, Zuckerberg renamed the company Meta in 2021 to underscore his belief that the concept represented the future of the internet. Despite its more recent focus on AI, Meta officials say the company is committed to building products for the virtual world of the metaverse.
“Two emerging technologies — AI and the metaverse — represent Meta’s biggest long-term bets on the future,” Meta Chief Technology Officer Andrew Bosworth wrote in a December blog post. “And in 2023 we began to see these two technological pathways intersect in the form of products accessible to huge numbers of people.”
But the metaverse has been a costly bet for the social media giant. Last year, its metaverse-focused Reality Labs division had an operating loss of $16 billion, compared to $13 billion and $10 billion losses in 2022 and 2021.
In the second quarter of 2024, the division posted an operating loss of $4.5 billion. For the full year, analysts project Reality Labs will post an operating loss of $19 billion, according to FactSet. The Family of Apps business headlined by Facebook, meanwhile, is projected to post $82 billion in operating income.
But the company has seen some progress in its efforts. Sales for Reality Labs surpassed $1 billion in the fourth quarter of 2023 for the first time. The category was helped by the launch of Meta’s latest VR headset, the Quest 3. Revenue for Q1 was $440 million, up 30% from a year earlier.
Zuckerberg, meanwhile, told analysts in late July that Meta’s Ray-Ban branded smart glasses are selling “Better than I think we had expected and we expected them to grow meaningfully from the first generation.” He credited AI functionality built into the glasses, including an AI-powered voice assistant. The Financial Times reported in July that Meta is considering taking a stake in Ray-Ban parent EssilorLuxottica to build on its smart-glasses partnership.
Meta Stock Technical Ratings
Meanwhile, the IBD Stock Checkup tool shows Meta stock holds an IBD Composite Rating of 96 from a best-possible 99. The score means Meta stock is currently in the top 5% of stocks in terms of key performance metrics and technical strength.
Meta stock’s Relative Strength rating has been climbing following its Q2 report. Meta stock has a Relative Strength score of 94 out of 99 as of August 14. That score indicates Meta has outperformed 94% of all stocks in IBD’s database over the past 12 months.
However, Meta stock holds a weak Accumulation/Distribution Rating of D+. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates more selling than buying by institutions.
Investors way want to wait for Meta stock to form a new base in the right market conditions before setting another potential buy point. Check out IBD’s Big Picture column for the current market direction.
Here is a guide to understanding IBD’s rating system.
Meta Stock Market Cap
You can check for Meta’s current stock price here. Meta’s market cap is $1.3 trillion, as of August 14. Here is how the stock has grown over time:
| Time Period | Meta Stock % Gain | S&P 500 % Gain |
|---|---|---|
| 2024* | 49.4 | 13.8 |
| Previous 12 Months* | 75 | 21.6 |
| 2023 | 194.3 | 24 |
| 2022 | -64 | -19 |
| 2021 | 23 | 29 |
| Since IPO (May 18, 2012) | 1,283 | 320 |
*Prices as of August 14
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