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On Wednesday, KeyBanc Capital Markets adjusted its outlook on Meta Platforms Inc. (NASDAQ: NASDAQ:META), reducing the price target to $645 from the previous $710 while continuing to endorse the stock with an Overweight rating. The adjustment comes amidst considerations of potential short-term earnings pressure but with an optimistic view on the company's long-term growth prospects. According to InvestingPro data, Meta maintains impressive financial health with a "GREAT" overall score and strong revenue growth of 21.94% in the last twelve months.
Justin Patterson, an analyst at KeyBanc, noted that despite the reduction in the price target, Meta remains a leader in its field, largely due to its successful investments in artificial intelligence (AI). The stock has experienced a significant 12.58% decline over the past week, potentially creating an attractive entry point. Patterson pointed out that Meta has the opportunity to enhance monetization strategies for its messaging platforms, Messenger and WhatsApp, and may also tap into search advertising budgets, supported by its robust gross profit margin of 81.68%.
Although there is a possibility of negative earnings per share (EPS) growth due to fixed cost deleverage, investors seem prepared to overlook this in light of Meta's potential to leverage its AI advancements. Patterson's revised base case now anticipates a slight EPS decline in 2025, leading to the lower price target which is set at 24.1 times the projected 2026 earnings. Currently trading at a P/E ratio of 20.58x, Meta appears reasonably valued according to InvestingPro's Fair Value assessment, with 12+ additional ProTips available for subscribers.
The KeyBanc analyst underscored Meta's ability to maintain a premium valuation over Alphabet (NASDAQ:GOOGL), citing clearer signs of progress in AI initiatives, such as the impressive download figures for its Llama application, and the potential for new revenue streams from monetizing additional platforms. Although near-term margin pressures may surprise investors, the long-term growth narrative for Meta is believed to remain robust. For deeper insights into Meta's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, along with detailed analysis of 1,400+ other top stocks.
The upcoming LlamaCon event is anticipated to provide further insights into Meta's AI progress, which could be a pivotal factor for the company's future growth trajectory. With the next earnings report due on April 30, 2025, KeyBanc's continued Overweight rating reflects confidence in Meta's strategic direction and its capacity to sustain a leading position in the technology sector.
In other recent news, Meta Platforms Inc. has been the focus of several analyst revisions and regulatory scrutiny. Baird analyst Colin Sebastian reduced the price target for Meta to $625 from $750, while maintaining an Outperform rating, citing a more conservative outlook due to market challenges. Wolfe Research also lowered its price target for Meta to $640 from $730, with expectations that the company's revenue will align with the upper end of guidance, though they anticipate a cautious near-term revenue outlook. Guggenheim Securities adjusted Meta's price target to $675 from $750, maintaining a Buy rating, and highlighted strong user engagement and advertising innovations as positive factors.
Meta's financial forecasts have been adjusted, with a revised 2025 revenue estimate of $187.5 billion and a GAAP operating income of $72.9 billion. The company is expected to continue its investment in AI and reality labs despite potential infrastructure cost increases. Meanwhile, the European Union is set to announce its decision on whether Meta and Apple (NASDAQ:AAPL) have violated the Digital Markets Act, with a verdict expected in the coming weeks. Analysts and investors are closely monitoring Meta's financial performance and regulatory developments to assess the company's growth trajectory.
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