Talk about a repeat performance. Shares of Meta Platforms kept the gains coming this year — hot on the heels of 2023, which everyone on Wall Street has dubbed “the year of efficiency.” A big question mark in 2025 is politics. Year-to-date performance: 70% to 70% Forward Price-to-earnings multiple: 24 vs. a five-year average of 21.2 Our rating: Equivalent Hold 2 Our price target: $650 per share ’24 look back Put for 2024 was all about the medicine Meta leaders took last year when they committed to reducing the layers of management to operate more efficiently and to reduce costs to improve profitability. It paid off — not only with a 156% increase in operating margin to end 2023 (last year’s fourth quarter reported on Feb. 1), but also with a greater than 20 percentage point increase in operating margin . Meta also declared its first dividend – a signal to investors of CEO Mark Zuckerberg’s confidence in achieving profitable growth while maintaining a focus on cash generation. The stock didn’t rise directly — it never does — as investors balked at Meta’s fiscal 2024 second-quarter revenue guidance and an upward revision to full-year capital spending. Both concerns were revealed alongside first-quarter earnings after the closing bell on April 24. The next day Meta shares lost 10.5% However, as we rightly “hindsight is always 20/20 of course” – noted in our analysis of this Q1 Report, the pullback was a buying opportunity. As the year went on, the stock quickly regained its footing and continued its ascent with the Street beginning to realize that the vast amount of user data that Meta has collected over the years puts it in a prime position to be a competitor to true in generative artificial intelligence. Meta uses AI to deliver better contextual content and ads. New AI creation tools for companies and organizations allow them to make their own ads. ’25 look ahead We’re confident that management will stick to its mantra of efficiency, but we also expect the team to keep their foot on the AI investment gas pedal and continue to move forward with Reality Labs, the unit that houses the effort metaverse and virtual reality headset. While losses at Reality Labs are expected to continue for the foreseeable future, we think the Street will be forgiving as long as red ink is kept under control and profitability and cash flow remain top priorities. After all, without upfront investment in big swings, we wouldn’t get products like Meta’s Ray-Ban-related eyewear, which is mostly irrelevant in terms of top-line contribution, but shows promise, especially after Zuckerberg’s preview of the Orion augmented reality prototype. . As the company brings more tools to its ad marketplace for sellers and finds new ways to engage with users, we’ll expect average revenue per user (ARPU) to increase. To achieve this, we’d like to see improved monetization of WhatsApp and Messenger, as well as more user growth in the newest addition to the App Family ecosystem, Threads, which is Meta’s answer to X. formerly Twitter. Enhanced capabilities for the company’s large language model, Llama, will be the next big focus – helping to strengthen the company’s businesses and opening up new revenue opportunities over time for consumer and business customers. Regulation is always a risk when it comes to social media companies, especially ones with as much reach as Meta. It’s not clear exactly where President-elect Donald Trump stands on Big Tech these days. But we do know that in the past he has criticized Meta and other tech firms for a bias against conservative voices. Zuckerberg and other tech CEOs have been cool with Trump since the election. Meanwhile, a challenge to the TikTok sales law will be heard by the Supreme Court on January 10 – nine days before the deadline for Chinese company ByteDance to sell TikTok or face a US ban and 10 days before Trump’s inauguration. A TikTok ban in the US would be a boon for Meta’s short videos that Reels offers. Additionally, while we think management is serious about maintaining cost discipline and reducing management complexity, investments in AI and other Reality Labs initiatives are risks. No one on Wall Street wants to see management take their eyes off the ball on profitability. (Jim Cramer’s Charitable Trust is long META. See here for a complete list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. 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At the Meta Connect developer conference, Mark Zuckerberg, head of Facebook’s Meta group, shows prototype computer glasses that can display digital objects in transparent lenses.
Andrei Sokolow | Photo Alliance | Getty Images
Talk about a repeat performance.
Meta Platforms stocks kept the gains coming this year — hot on the heels of 2023, which everyone on Wall Street is referring to as “the year of efficiency.”
A big question mark in 2025 is politics.
