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Meta’s Q2 2024 earnings are highly anticipated, with analysts forecasting robust growth due to AI investments and strong financial performance.
With the tech giant expected to share its results on July 31, tech stocks across the board witnessed the worst sell-off since October 2022. Many analysts expect an improvement in the social media company’s financial health, anticipating Meta’s further foray into AI.
Most recently, Mark Zuckerberg reinforced these expectations in his talk with Nvidia’s CEO, Jensen Huang.
Live from #SIGGRAPH2024: Our CEO Jensen Huang and @Meta CEO Mark Zuckerberg chat on #AI and the next computing platforms. Watch the livestream to discover #generativeAI and virtual world breakthroughs, and how research is driving AI advancements. https://t.co/HXOSbm8q95
— NVIDIA (@nvidia) July 29, 2024
Meta’s Segment Anything 2 (SA2), unveiled by Zuckerberg at the SIGGRAPH conference, extends the company’s successful machine learning model from image to video segmentation, showcasing rapid advancements in the field. SA2 can efficiently process video, offering zero-shot segmentation, and comes with a large, annotated database of 50,000 videos for training. However, Meta has not released an additional internal dataset for the model’s development.
Meta Stock: Strong Fundamentals
Meta’s revenue grew by 27% in Q1 of 2024, and its earnings per share increased by 114%, beating the estimates with an EPS of $4.71. Meta’s return on capital employed (ROCE) is 29%. Such consistent compounding returns are impressive, and the shareholders holding Meta stock from the previous five years have earned a remarkable return of 149%.
Meta stock holds an IBD Composite Rating of 98 out of 99. It’s in the top 8% regarding technical strength and performance metrics. Meta plans to invest more in infrastructure for AI development, which might hinder earnings growth. However, with accelerating capital expenditure, its stock would recover and meet the analyst price targets.
The capital expenditure of Meta for the full year 2024 is also expected to increase within the range of $35-$40 billion as compared to the $30-37 billion – an increase of 12%. This increase in the range of CapEx is due to the investment in infrastructure supporting AI initiatives and open-source language model Llama. As per IMF (International Monetary Fund) latest update, global economic growth is expected to be around 3.1%. which will likely boost consumer spending increasing the Meta revenue flows.
Though Meta’s investments in virtual and augmented reality are at a loss, with a shortfall of $16 billion, advertising revenue remains crucial to maintaining robust revenue growth. Meta’s advertising revenue was $134 billion in 2023, as per Statista, and it is expected to grow further due to AI-powered ad delivery.
According to Wall Street estimates, Meta’s profit is expected to increase due to its yearly revenue compared to last year. These estimates are good at predicting the company’s revenue, but the real factor that will determine the stock prices is the actual earnings report, expected on 31 July 2024.
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Meta Shares Forecast | Source: Investopedia
Mark Shmulik, a star analyst at Bernstein, has maintained a buying rating for the Meta stock, despite lowering the price target from $590 to $565. The company is expected to experience double-digit growth in earnings and revenue.
Meta Stock Prediction 2024
European regulatory and anti-trust laws are likely to impact Meta’s operation. The European Commission has warned the parent company for breaching the anti-trust laws and disrupting market competition. With the infringement of rules, Meta would face a fine of 10%? ($13.4 billion) of the company’s annual global turnover, likely disturbing the revenue flow.
Overall, the predictions for Meta stock in 2025 are bullish due to investments in the Al and promising advertising revenues that make 98% of the total revenues. The company is anticipated to post earnings per share of $4.69, registering a 45% YoY increase. Revenues are expected to be up by 19.6%, around $38.27 billion.
The ban on TikTok, one of its effective competitors, will likely benefit Meta. Potential risks might arise from regulatory laws, market competition, and macroeconomic instability. Meta is likely to cut its Reality Labs budget by 20% in 2024-26 due to a loss of $55 billion since its inception in 2019.
