Meta Platforms META shares are trading at a premium as suggested by the Value Score of D. In terms of the forward 12-month Price/Earnings (P/E), META is trading at 24.18X, a premium compared with the Zacks Computer & Technology sector’s 23.72X. 

Meta Platforms shares are trading at a premium compared to its closest peer in the digital advertising domain, Alphabet GOOGL, but at a discount compared with Amazon AMZN. In terms of the forward 12-month P/E, Alphabet shares are trading at 16.26X, while Amazon is trading at 31.44X.  Meta Platforms, Alphabet and Amazon are expected to absorb roughly 50% of the projected global ad spending by 2028.

P/E Ratio (F12M)Zacks Investment Research

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Although higher tariffs and a prolonged trade war have the potential to hurt digital advertising spending, negatively impacting prospects, we believe Meta Platforms’ AI focus is a key catalyst.  Meta Platforms’ focus on leveraging AI to improve user engagement is noteworthy. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.43 billion daily users. Meta AI usage continues to increase, with roughly one billion monthly users globally. The company’s initiative to add updates that will help Meta AI deliver more personalized and relevant responses is expected to boost engagement. 

Amid an uncertain macroeconomic environment, Meta Platforms shares have appreciated 9.2% year to date, outperforming the broader sector as well as peers, including Alphabet and Amazon, shares of which have dropped 4.9% and 16.3%, respectively.

META Stock’s PerformanceZacks Investment Research

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META shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

META Shares Trade Above 50-Day and 200-Day SMAsZacks Investment Research

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META Leverages AI to Boost Advertising Revenues

Meta Platforms focuses on improving advertisers’ return on ad spending. Its proprietary machine learning system, Andromeda, for retrieval in ad recommendation is powered by NVIDIA NVDA. The deployment of META’s deep neural network on the NVIDIA Grace Hopper Superchip across Instagram and Facebook applications has achieved more than 6% recall improvement to the retrieval system while delivering over 8% ad quality improvement on selected segments. 

Meta Platforms’ focus on making Meta AI the leading personal AI with a deepening emphasis on personalization, voice conversations, and entertainment is a key catalyst. The launch of Meta AI’s standalone app is a noteworthy development in this regard. 

The launch of the new Generative Ads Recommendation model for ads ranking that was used on Facebook Reels has increased conversion rates by 5%. Meta Platforms also saw 30% more advertisers using AI creative tools. Improvements in META’s recommendation system have led to a 7% increase in time spent on Facebook, a 6% increase on Instagram, and a 35% increase on Threads over the past six months. 

META’s growing focus on social commerce through Facebook, Instagram and WhatsApp is noteworthy. In first-quarter 2025, WhatsApp Business Platform as well as Meta Verified subscriptions contributed to deliver 34% year-over-year growth in Family of Apps other revenues, reaching $510 million.

Story Continues

META’s Estimate Revision Shows Upward Movement

The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $5.84 per share, up by 3.2% over the past 30 days, indicating a 13.18% year-over-year increase.

META’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 17.30%.

Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote

Here’s Why You Should Hold META Stock Right Now

AI usage is making META a popular name among advertisers as well as users.

However, operating expenses are expected in the $114-$119 billion range, with headcount expected to increase within infrastructure, monetization, Reality Labs, Generative AI, regulations and compliance. Regulatory concerns in the United States and Europe, along with tariffs, make the stock a risky bet.

META is spending heavily on expanding AI infrastructure. For 2025, capital expenditure is expected to be between $64 billion and $72 billion, driven by its Gen AI initiatives and core business. 

Although these investments bode well for the company’s longer-term prospects, we believe the lack of monetization of new platforms, such as Threads and Meta AI, is a concern. The company doesn’t expect Threads to be a meaningful driver of overall impression or revenue growth in 2025. Meta Platforms plans to focus on scaling and deepening engagements for Meta AI over the next few years.

META currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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