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Investing.com - Meta Platforms Inc. (NASDAQ:META) was downgraded by Oppenheimer from Outperform to Perform on Thursday as the investment firm cited concerns about the company’s significant investments in artificial intelligence. Despite the downgrade, Meta maintains a market capitalization of $1.89 trillion and trades near its 52-week high, with the stock up 37% over the past six months.
Oppenheimer highlighted Meta’s substantial spending on "Superintelligence" despite what it described as an "unknown revenue opportunity," drawing parallels to the company’s heavy Metaverse investments in 2021/2022. According to InvestingPro data, Meta operates with a moderate debt level and its cash flows can sufficiently cover interest payments, potentially giving it financial flexibility for these investments.
The downgrade came after Meta’s implied fourth-quarter operating expenses and capital expenditures were both 7% ahead of consensus estimates, with the company guiding for fiscal year 2026 capital expenditure growth "notably larger than 2025" and expenses increasing "significantly faster" than 2025’s projected 23% growth.
While Meta reported third-quarter advertising revenue growth of 25% excluding foreign exchange effects, compared to 21% in the second quarter and 4% above Oppenheimer’s estimates, the firm questioned the lack of rationale for guidance suggesting a 600 basis point deceleration in the fourth quarter. InvestingPro data shows Meta maintains impressive gross profit margins of nearly 82%, with revenue reaching $178.8 billion in the last twelve months.
Oppenheimer suggested investors would struggle to rationalize Meta’s price-to-earnings ratio until there is visibility into 2027, noting that both Meta and Alphabet (NASDAQ:GOOGL) are trading at the same PE multiple of 21x 2027 estimates, while predicting that Search could potentially outgrow Meta at some point in 2026. Currently, Meta trades at a P/E ratio of 27.1 but has a favorable PEG ratio of 0.62, suggesting it may be trading at a reasonable valuation relative to its growth rate. For deeper analysis and more insights on Meta’s valuation metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Meta Platforms Inc. reported its third-quarter 2025 earnings, which revealed a notable discrepancy between earnings per share (EPS) and forecasts. The company announced an EPS of $1.05, falling short of the expected $6.68, resulting in an EPS surprise of -84.28%. However, Meta’s revenue for the quarter reached $51.2 billion, surpassing the anticipated $49.36 billion and marking a 26% increase from the previous year. Following these results, Goldman Sachs adjusted its price target for Meta to $815 from $870, maintaining a Buy rating despite what it described as a "mixed quarter." Goldman Sachs highlighted strong core business operations but noted a continued elevated investment cycle that might impact future stock performance. These developments reflect recent changes and expectations for Meta Platforms Inc.
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