Meta Reports Strong Q1 Earnings, Stock Outlook Remains Uncertain
Meta Stock (NASDAQ: META) recently announced its Q1 financial results, showcasing revenues and earnings that surpassed Wall Street expectations. The company reported sales of $42.3 billion and earnings of $6.43 per share, outperforming consensus estimates of $41.3 billion and $5.22, respectively. Meta’s growth is fueled by a growing user base, and its Q2 outlook suggests continued strength.
As of April 30, META Stock has seen an 8% decline since the start of the year, compared to a 10% drop in the NASDAQ index. Investments in artificial intelligence (AI) are beginning to yield positive results in user engagement, which is encouraging for its Stock. Investors may find worth in the High-Quality portfolio, which has outperformed the S&P with over 91% returns since inception.
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Q1 Performance Overview for Meta
Meta Platforms achieved revenues of $42.3 billion in Q1, a 16% year-over-year increase. This growth stemmed from a 5% rise in ad impressions and a 10% increase in average ad prices. The number of family daily active users (DAP) grew by 6%, reaching 3.43 billion. The company’s primary income source is advertising across its family of apps, including Facebook, Instagram, Threads, and WhatsApp. Meta is leveraging AI to improve ad targeting and generate content, supported by substantial infrastructure investments, with projected capital expenditures ranging between $64-72 billion for 2025.
In addition to higher revenues, Meta’s operating margin increased to 41%, up approximately 300 basis points year-over-year. Consequently, the company reported earnings of $6.43 per share, reflecting a 37% annual growth. For Q2, Meta anticipates revenue between $42.5 billion and $45.5 billion. At the midpoint of this range, sales align with the consensus expectation of $44 billion.
Implications for META Stock
Meta’s impressive Q1 results led to an uptick in after-hours trading for META Stock. Over the past four years, however, the stock’s performance has been inconsistent. Annual returns have varied widely: 23% in 2021, -64% in 2022, 194% in 2023, and 66% in 2024.
In contrast, the Trefis High Quality (HQ) Portfolio, which consists of 30 stocks, has demonstrated much lower volatility while outperforming the S&P 500 over the same four-year period. This performance is attributed to the HQ Portfolio’s ability to provide better returns with less risk compared to the benchmark index.
Considering the current unpredictable macroeconomic conditions surrounding tariffs and trade tensions, questions arise about META Stock‘s potential for substantial growth. Estimates place Meta Platforms’ valuation at around $702 per share, indicating a 20% upside from its current level of approximately $580 (after hours). This forecast is based on a 27x price-to-earnings (P/E) ratio, higher than META’s average P/E of 22x over the past four years, and is supported by strong advertising growth and improved profitability.
However, risks remain. Ongoing tariff challenges may dampen ad spending from China, while Meta’s significant investments in AI introduce uncertainty regarding their effectiveness in enhancing future earnings growth.
While META Stock shows plenty of growth potential, it is essential to observe how Meta’s Peers compare across key metrics. Additional valuable comparisons are available for companies spanning various industries under Peer Comparisons.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
