Analyst Raises Meta Platforms (META) Price Target Amid ‘Deepest’ AI Product Cycle

December 28, 2024

Fahad Saleem

5 min read

We recently published a list of Analysts Are Talking About These 10 AI Stocks. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against other stocks analysts are talking about.

Marco Argenti, Chief Information Officer at Goldman Sachs, recently said that in 2025, the world will witness the full potential of AI that has been in development. He used the analogy of a child raised in a library, now ready to step out into the world.

“What if they, we make them interact with sensory data, with vision data, with, uh, you know, like basically opening that door of the library and making this child walk into the real world? I think this creation of word models, like they’re called generally in the industry, where you combine multimodal information, that is not only text but is also videos, but is also sensory data. It might be temperature, it might be anything you can perceive around you, could actually unlock the next level of capabilities,” Argenti said, according to CNBC.

Despite high hopes, a potential plateau in performance improvements in AI systems, high energy consumption of AI data centers and transparency remain key issues tech companies will continue to grapple with in 2025.

For this article, we picked 10 AI stocks currently trending based on latest news and analyst ratings. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Analyst Raises Meta Platforms Inc (META) Price Target Amid ‘Deepest’ AI Product Cycle

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Number of Hedge Fund Investors: 235

Meta (NASDAQ:META) is one of Citi’s top picks for the Internet sector as they enter 2025 with ongoing multi-year product cycles.

“In many ways, the momentum in 2024 across most Internet sub-sectors should continue into 2025, and this bodes well for our broader coverage,” said Citi analysts, led by Ronald Josey, in an in-depth report. “But for durable outperformance, we look for product led growth, and we believe Meta’s product cycle is one of the deepest with MetaAI and Search, Llama, Agents, and AI engagement and monetization opportunities.”

Citi raised price targets on Meta to $753 from $705.

Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta also reported strong adoption of its Llama AI model, attracting over 500 million monthly active users across its platforms. This progress positions Meta well for robust profitability in the next two years as it scales its AI infrastructure.

Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI.

Meta Platforms (NASDAQ:META)’s clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market. Although short-term investors may be concerned about Meta Platforms (NASDAQ:META)’s increased AI spending, its forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock, after Google, within its peer group (Apple, Amazon, Microsoft, and Google).

Hardman Johnston Global Equity stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:

“During the quarter, we initiated one new position in Meta Platforms, Inc. (NASDAQ:META) and had no liquidations. Management at Meta has effectively addressed concerns about investment efficiency by shifting resources from Reality Labs towards broader AI initiatives with a clearer path to profitability. We believe management has successfully articulated the benefits of this strategy, highlighting how AI is driving user engagement and advertiser productivity. This, in turn, fuels continued revenue momentum and increases the likelihood of positive earnings surprises in the future. Additionally, the parent company of the social media platform, Facebook, has recently taken positive steps to enhance safety, which suggests to us a shift towards a more proactive and responsive approach to addressing important potential challenges and concerns. Weak oversight over data privacy protection was a key reason why we sold the position in the portfolio back in 2021. Removing this governance overhang allows us to feel comfortable to enter back into the stock at a time when we believe it is poised for strong earnings growth going forward.”

Overall, META ranks 2nd on our list of stocks analysts are talking about. While we acknowledge the potential of META, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Disclosure: None. This article is originally published at Insider Monkey.

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