Meta Stock Slips as Facebook Parent Ramps Up AI Spending

Meta Platforms (META) stock is trading in negative territory Thursday after the parent company of Facebook and Instagram beat top- and bottom-line expectations for its third quarter, but came up short on user growth. A big boost in the company's spending outlook is also causing concern for investors.

In the three months ended September 30, Meta's revenue increased 18.9% year over year to $40.6 billion, due in part to a 5% rise in its family daily active people (DAP) to 3.29 billion. Meta also said its earnings per share (EPS) rose 37.4% from the year-ago period to $6.03.

"We had a good quarter driven by artificial intelligence (AI) progress across our apps and business," said Meta CEO Mark Zuckerberg in a statement. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses."

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The headline results beat analysts' expectations. Wall Street was anticipating revenue of $40.3 billion and earnings of $5.25 per share, according to CNBC. However, its DAP came up short of expectations of 3.31 billion.

For the fourth quarter, Meta said it anticipates revenue in the range of $45 billion to $48 billion. The midpoint of this range, $46.5 billion, came in just ahead of analysts' expectations of $46.3 billion.

Meta also raised the low end of its full-year capital expenditures outlook, now anticipating a range of $38 billion to $40 billion from the previous guidance of $37 billion to $40 billion.

In Meta's prepared remarks, Chief Financial Officer Susan Li added that the company continues to expect "significant capital expenditures growth in 2025" as it continues to invest in its AI infrastructure.

Is META stock a buy, sell or hold?

Meta Platforms has been one of the best-performing Magnificent 7 stocks in 2024, up more than 67% for the year to date on a total return basis (price change plus dividends). Unsurprisingly, Wall Street is upbeat toward the communication services stock.  

According to S&P Global Market Intelligence, the average analyst target price for META stock is $629.77, representing implied upside of roughly 9% to current levels. Additionally, the consensus recommendation is Strong Buy.

Financial services firm Oppenheimer has an Outperform rating (equivalent to a Buy) and $650 price target on the large-cap stock.

"Meta Platforms Inc. is the world's largest social networking company, with 3.7 billion monthly users across all its properties," says Oppenheimer analyst Jason Helfstein. "While META's historical advantage has been the social graph and the ability to share and follow pictures and videos uploaded by users, the company now believes it must evolve to use advanced algorithms to deliver content to users and leverage its social graph in the Metaverse."

The analyst adds that AI will help drive revenue upside through increasing engagement for users and better conversion for advertisers.

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