Meta Platforms (NASDAQ: META) has been on a 10-day rally and gained 14% so far. This is the longest streak since 2015. META stock now trades at around $700.
Shares were cratering back in 2022 due to Meta Platforms investing in its Reality Labs segment, which is very capital intensive and likely will take over a decade to generate profits, if ever. It also had other problems as active users were declining and Apple’s (NASDAQ: AAPL) privacy reforms also stung.
Fast forward to 2025, the stock is now at $700 and analysts believe it will continue to rally. This Lazarus-like turnaround is due to Zuckerberg’s “Year of Efficiency” cost-cutting, a $50 billion buyback spree, and of course, AI. Instead of investing its cash flow from the “Family of Apps” segment into Reality Labs, it started investing in AI, and that has reignited growth significantly.
24/7 Wall St. Key Points:
- META stock has soared in the past few months.
- The recent earnings report has added even more to the momentum.
- Should you buy the stock, or should you risk missing out on the rally? Let’s take a look. In the meantime, grab our free “The Next NVIDIA” report. It includes a software stock with 10X potential.
Meta’s Q4 2024 Blowout Earnings
Meta Platforms posted $48.39 billion in revenue, up 21% year-over-year. EPS came in at $8.02 per share and trounced Wall Street’s $6.76 estimate. Net income also rose 49% to $20.84 billion. Reality Labs continued to remain a drag, but investors shrugged it off as Zuckerberg’s focus this time is on AI.
Moreover, while earnings handily beat estimates, the guidance was relatively soft. Meta’s Q1 2025 guidance came in at $39.5 billion to $41.8 million. This points to 8-15% year-over-year growth and fell short of consensus estimates at the midpoint. Meta also didn’t issue full-year revenue projections.
Analysts don’t seem bugged by it, as Meta plans to ramp up CapEx to $60 billion to $65 billion this year. This is a 53-66% jump from last year, and mainly because of AI-related spending. All this should lead to more growth this year, so that’s likely why analysts have continued to reward Meta.
The Bull Case: Can META Stock Reach $875?
Pivotal Research analyst Jeffrey Wlodarczak recently slapped Meta Platforms with a $875 price target. This implies a 25% upside from the current price level. Pivotal predicts Meta’s AI investment will supercharge the company’s ad engine and boost conversions beyond its current 7% gain. Pivotal research argues that if Meta AI’s 500 million users generate even $1 per month, that’s $6 billion in annual revenue.
Plus, there are open-source Llama models, which are more “trendy” after DeepSeek. Meta is expected to sell 100 million units of its Ray-Ban smart glasses this year, so this could be another $25 billion in hardware/services revenue. Threads alone could add $8 billion in annual revenue by 2027 if engagement rivals that of Twitter/X.
If all this optimism comes true, then yes, META stock will likely reach $875.
The Bear Case: Can META Stock Decline to $610?
BMO Capital Markets analyst Brian Pitz has a $610 price target on META stock. This is 11.6% below the current price and he argues that the company’s “bloated” $114 billion to $119 billion 2025 operating expense guidance could erode margins faster than AI monetizes.
The pessimism is pretty well-founded, since CapEx isn’t really a good thing, fundamentally speaking. And that should hold especially true when talking about something unprofitable like AI. If DeepSeek or some other model can undercut Meta, there’s a good risk of this becoming a money pit. Alphabet’s (NASDAQ: GOOG) (NASDAQ: GOOGL) AI budget was $51 billion last year despite 80% higher quarterly revenue, so Meta Platforms is betting a lot here.
Also, Q4 ad revenue jumped 21% year-over-year, but BMO noted that video monetization lagged engagement growth by 14%. This is a gap Meta hasn’t closed since Reels launched in 2020. Analysts fear that TikTok’s AI-driven tools could siphon market share, and with Trump in office, it’s unlikely to be banned.
And obviously, there’s Reality Labs. Zuckerberg hasn’t given up on it, and it burned $5 billion in Q4 alone. There is no path to profitability here for the foreseeable future.
All things considered, META going to $610 can happen. I don’t see it happening anytime soon, but if we see a broader tech correction, META stock could fall well past even $610.
Should You Buy, Sell, or Hold META?
I’ll be boring and say that you should hold META stock, perhaps with a bullish tilt. The calculus basically boils down to risk appetite and what you think about the broader macro picture. Most tech stocks, especially the big tech ones, are currently due for a correction from their current valuations. If that correction happens early, there’s a lot of downside risk here.
On the other hand, if the AI mania continues, you can lose out on a lot. The current climate still allows for fatter valuations We’re nowhere near Dot Com valuations, but we’re also far higher than normal. The Nasdaq 100 trades at, 37 times earnings, which is back at 2021 “everything bubble” levels. As such, I wouldn’t be too bullish on META stock.
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