Meta Platforms Ends U.S. Fact-Checking to Enhance User Freedom
Meta Platforms (META) is abolishing its third-party fact-checking program in the United States, a system that was initiated in 2016. This decision aims to foster more open dialogue on its platforms. Similar to Elon Musk’s X, META is adopting its Community Notes program, allowing users to flag misleading or poorly-contextualized posts.
Community Notes Launches for Facebook, Instagram, and Threads
Users on Facebook, Instagram, and Threads can now apply to be early contributors as META rolls out the Community Notes program in stages over the next few months. This shift is anticipated to increase user engagement by allowing more open discussions, particularly on sensitive topics such as immigration and gender identity—topics that were previously limited by automated systems under the fact-checking program.
Moving forward, Meta Platforms will rely on automated systems to monitor serious violations like terrorism and child exploitation while waiting for user reports on less severe breaches. The company will also utilize AI large language models to reassess content before deciding to demote it.
Improving Returns for Advertisers Through Advanced AI
This removal of strict content oversight aims to enhance user participation across META’s platforms. Despite the risk of more harmful content, the extensive use of AI is expected to maintain user safety, which could bolster advertising revenues—approximately 99% of META’s income.
Increased ad revenues have significantly fueled META’s share growth. Over the past year, META shares have risen by 73%, outperforming the Zacks Internet Software industry, which saw returns of 40.2%, and the Zacks Computer & Technology sector with a 37.7% return during the same period.
The positive advertising momentum has also allowed META to surpass competitors like YouTube’s parent, Alphabet (GOOGL), which returned 38.7%, and Snap (SNAP), which fell by 26.4% during the same timeframe.
Comparing META with Industry Peers
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Meta is enhancing advertisers’ return on ad spend through its machine learning system, Andromeda, which utilizes NVIDIA’s NVDA Grace Hopper Superchip and Accelerators. This system effectively narrows down millions of ads to a few thousand relevant ones that are prioritized through advanced ranking models.
Andromeda improves ad performance by delivering highly personalized ads. Its implementation across Instagram and Facebook has led to over a 6% improvement in relevance and more than an 8% enhancement in ad quality for select segments.
META Leverages Data for Enhanced User Engagement
META’s strategy of using AI for increased user engagement hinges on its massive data resources, driven by over 3.2 billion daily users. This data allows Meta to strengthen its platform offerings, including WhatsApp, Instagram, Messenger, and Facebook.
As a result of rising ad impressions, which increased by 7% year-over-year in the third quarter of 2024, META solidifies its significant role in the digital advertising market, alongside Alphabet. Threads has attracted over 275 million monthly active users, and META anticipates this app will become a major social platform.
META’s Llama family of AI models has shown impressive growth, particularly in 2024. The anticipated Llama 4 models, set for release next year, promise enhanced capabilities and faster processing than Llama 3 models.
META’s Earnings Forecasts Point to Growth
The Zacks Consensus Estimate for the first quarter of fiscal 2025 earnings stands at $5.40 per share, reflecting a slight increase over the past two months, which also marks a 14.65% rise year-over-year.
Projected revenues for the same quarter are expected to reach $41.85 billion, an increase of 14.81% compared to last year.
META has succeeded in surpassing the Zacks Consensus Estimate consistently across the last four quarters, averaging an 11.34% surprise.
Price and Consensus for Meta Platforms, Inc.
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The Zacks Consensus Estimate for fiscal 2025 earnings is now projected to be $25.21 per share, increasing by 0.5% in the last 60 days. This estimate represents an 11.12% rise compared to the estimated $22.68 for 2024.
For fiscal 2025 revenues, the consensus projects $187.17 billion, indicating a 14.77% increase over the anticipated $163.09 billion for 2024.
META Stock Valuation Status
Despite META’s promising growth, its stock is currently not viewed as cheap. With a Value Score of C, the stock appears to face valuation concerns.
As for the forward 12-month Price/Sales ratio, META is trading at 8.32X, above its median of 7.62X and the broader sector’s average of 7.26X.
Forward Price/Sales Ratio
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Conclusion
META’s expanding presence among younger adults, supported by improved ad recommendations, enhances its competitive edge. Its innovative AI applications have increased its desirability for advertisers, which is expected to sustain revenue growth and propel the company’s share momentum.
META holds a Zacks Rank #2 (Buy) and a Growth Score of A, illustrating a strong investment opportunity according to Zacks’ proprietary methodology. A full list of today’s Zacks #1 Rank (Strong Buy) stocks can be found here.
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The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
