Is Meta Stock A Buy With First Quarter Earnings Due, AI Chatbot Launch? (2024)

Last year was a comeback year for Meta Platforms (META), after a disastrous 2022 for the Facebook parent company. What's in store for Mark Zuckerberg and Meta stock in 2024?

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Meta stock surged after its fourth-quarter earnings report in early February, which showed record sales and was headlined by plans for its first-ever dividend. Meta stock is up more than 45% in 2024. But the stock traded mostly sideways in the weeks that followed, including a recent down week that matched the broader market.

In January, Meta climbed back above a trillion-dollar market cap. That put the Facebook and Instagram parent company in rarefied tech air, joining Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Google parent Alphabet (GOOGL)and Amazon (AMZN).

But there is work ahead for the social media giant to stay in the trillion-dollar club. The Menlo Park, Calif.-based company is a leader in digital advertising. The market that can run hot and cold with the broader economy. Meta wants to establish itself as a leader in generative artificial intelligence and the metaverse, bets that require big spending.

So is Meta stock a buy? Here's what to know about recent news and action involving Meta stock:

What Are The Expectations For Meta's Q1?

All eyes will be on Meta's earnings this week. The social media giant will announce its results for its March-ending quarter on April 24, after the market closes.

Analysts project Meta will post sales of $36.14 billion, according to FactSet, up 26% from the same period in 2023. Earnings are projected to rise 95% to $4.32 per share.

The turnaround for Meta's sales growth started with the company's first quarter 2023 report last spring. Meta squeaked out a 2.6% year over year increase in revenue, to $28.65 billion, for its March 2023 quarter. Before that, Meta's sales had declined year over year for three consecutive quarters. Since then, the Facebook parent company's year-over-year sales growth has accelerated three quarters in a row, up to a 24% in the fourth quarter of 2023.

The projections see Meta pushing that growth rate slightly higher for its most recent quarter, despite coming up against a harder comparison.

Analysts will be watching Meta's capital expenditures and other costs, amid the dual initiatives of being an artificial intelligence leader and building the metaverse. The strength of Meta's digital advertising business will still be the main focus, however, as ads still drive nearly all of Meta's revenue. The company has seen strong growth from e-commerce firms in China, including Temu, buying ads to reach Facebook and Instagram users in America and elsewhere.

Meta.AI Aims To Be Leading AI Assistant

Meanwhile, Meta recently launched its most significant AI push yet. On April 18, Zuckerberg announced a series of new updates for the company's Meta.ai chatbot. The chatbot is powered by Meta's Llama large language model, which also got a big update with the release.

Zuckerberg wrote on Threads Thursday that the company's goal is to "build the world's leading AI."

The trillion-dollar tech giant is featuring the chatbot more prominently across Facebook, Instagram, Messenger, WhatsApp and Threads. The company also launched a stand-alone website for the bot at Meta.ai. The launch marks Meta's clearest challenge yet to ChatGPT, the AI chatbot from OpenAI that started the generative AI craze in November 2022. Zuckerberg said on Threads Thursday that he views Meta.ai as the "most intelligent AI assistant that you can freely use."

Meta stock gained about 1.5% in trading on Thursday, the day it announced the new chatbot.

Meta Launches Updated AI Chip

The company is also making an AI hardware push. On April 10, Meta announced details about the latest version of its custom computing chip for artificial intelligence. In a blog post, the company called it the "next-generation" version of the Meta Training and Inference Accelerator, a family of custom-made chips that Meta launched last year.

The chip is part of an effort from Meta to optimize its data centers for the massive amount of computing power behind AI.

The chips showed "significant performance improvements" in powering AI models Meta uses for ranking and recommending ads across its platforms. The chip will also power Meta's AI research.

"MTIA is a long-term venture to provide the most efficient architecture for Meta's unique workloads," the company blog post said. "As AI workloads become increasingly important to our products and services, this efficiency will improve our ability to provide the best experiences for our users around the world."

Meta Stock: AI Push

Further, the chip is part of a broader effort by Meta to use generative AI to boost its social media offerings.

That's despite Zuckerberg renaming the company nearly three years ago from Facebook to Meta. The move signaled the company's plan to embrace an augmented-reality metaverse. But investors and the tech world at large these days are far more anxious to hear about generative AI.

Last year, Meta launched its own large language model, called Llama, to power generative AI applications. In the fall, the company rolled out a series of consumer-focused chatbots, each designed to have a distinct personality.

Zuckerberg describes Llama as an open-source approach to AI. He's focused on attracting software developers to create tools using Llama. As for revenue from those efforts, Zuckerberg said the company expects its chatbots and other AI tools to drive more engagement with its products.

"Whenever there's more engagement in the apps, that creates the opportunity for more monetization," Zuckerberg said on the company's October earnings call.

AI is also powering what the company has described as a new recommendation engine for videos on Facebook and eventually across Meta's apps, Facebook leader Tom Alison said at a recent Morgan Stanley investor conference.

Zuckerberg in January announced that the company plans to acquire billions of dollars worth of Nvidia chips. He said it is part of an ambitious plan to build a "massive compute infrastructure" to support its AI offensive.

"Our long term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit," Zuckerberg said.

Up next, Meta is readying the latest version of its Llama AI model. The company is expected to launch the open-source model later this month, according to a report by The Information

Meta Stock: Wall Street Projections For 2024

For the full year, analysts project that Meta's revenue will rise 17% to $158 billion in 2024, after climbing 15.7% last year, according to FactSet. Revenue slipped 1.1% in 2022.

Despite its push into AI and the metaverse, social media advertising remains the heart of Meta's business. About 98% of its revenue is from advertising on its "Family of Apps." The category includes Facebook, Instagram, Messenger, Reels, WhatsApp and Threads.

It's a massive empire.

Facebook alone had more than 3 billion active users as of December, according to the company's last earnings report. The most recent survey from Pew Research Center found that 67% of Americans use Facebook, while 47% use Instagram. Meanwhile, 35% of Americans said they use Pinterest (PINS), 33% use TikTok, 30% Microsoft-owned LinkedIn and 27% use Snapchat, according to Pew.

The huge user bases for Facebook and Instagram, paired with an AI-powered advertising sales platform, help Meta dominate social media advertising. Research firm eMarketer estimates Meta will capture 21.9% of all U.S. digital advertising sales in 2024. Only Google has a bigger projected share, with 27.4%. Amazon is third, with 8.5% of the market.

Some analysts see further upside for Meta's sales growth. In a March client note, Mizuho analysts led by James Lee named Meta stock a top pick for the year.

"Improving monetization in Reels, geographic expansion and Amazon partnership of Shops, and unified ranking to optimize video placements give us incremental confidence in our above-the-Street revenue growth of 20%," Lee wrote.

What Would A TikTok Ban Mean For Meta?

Something else to watch for Meta stock: One of its biggest competitors could be banned from the U.S. On March 13, the House of Representatives voted in favor of a bill that would require TikTok to either be sold by its Chinese parent company, ByteDance, or be banned in the U.S.

President Joe Biden previously said he would sign the bill, if approved by Congress.

Lawmakers and othersin favor of a TikTok ban view the short-video app as a potential security threat and fear user data could be shared with the Chinese government. There are also concerns that TikTok's algorithmic content recommendations could be used to shape public opinion among U.S. users. Meanwhile, those against the potential ban, or forced sale, say the idea violates free speech rights. Further, TikTok's ownership denies that it is controlled by the Chinese government.

Zuckerberg has previously acknowledged TikTok as a "very effective competitor." Instagram and Facebook compete against TikTok for user attention, plus advertiser dollars. Meta launched its own short-video product, Reels, late in 2021 in response to TikTok's rapid rise in the U.S.

Debra Aho Williamson, an independent tech analyst, told IBD earlier this month that advertisers can wait for further clarity in the Senate before adjusting their strategy. But if changes do come to fruition, a major question for marketers will be where the TikTok audience goes.

"The logical destinations are Instagram Reels and YouTube Shorts," Williamson told IBD. "Of the two, I think users would gravitate more toward Reels, and advertisers would follow."

Investors appear to be taking a wait-and-see approach. Meta stock closed slightly lower the day the House approved the TikTok bill.

Meta's 'Monumental' Q4 Earnings Report

Meta stock surged 20% following its fourth quarter earnings report at the start of February. That marked a gain in value of nearly $200 billion in market cap for the company.

The company easily topped Wall Street analysts consensus estimate with earnings of $5.33 per share and sales of $40.1 billion. Sales for the quarter increased 25% year over year, while earnings increased 203%.

Further, Meta said it is initiating a dividend of 50 cents per share of common stock, payable on March 26.

Stifel analyst Mark Kelley raised his 12-month price target from 405 to 527, implying 33% upside from Meta as of the time of the Feb. 1 report. Kelley rates Meta a buy.

"The company is firing on all cylinders and continues to hammer home the notion that this will be a more efficient and leaner organization going forward, despite the heavy AI investment cycle that is well underway," Kelley wrote in a note titled "A Monumental Quarter."

Is It Still Meta's Year Of Efficiency?

With Wall Street wary of Meta's ballooning costs, Zuckerberg pledged to investors early in 2023 that the company would embrace a "Year of Efficiency." That included more than 20,000 layoffs and cutting back on other expenses for the tech giant.

Those cost cuts, plus a return to double-digit revenue growth, powered huge earnings increases. Meta's fiscal year earnings jumped 73% to $14.87 per share, compared to a 38% year over year earnings decrease in 2022.

In February, Zuckerberg told analysts that "being a leaner company is helping us execute better and faster."

However, Meta that same month raised the high-end of its capital expenditures guidance for 2024 to a range between $30 billion and $37 billion.

"Our expectation is generally that we will need to invest more to support our AI work in the years ahead, and we're seeing some of that reflected in 2024," Chief Financial Officer Susan Li told analysts.

Meta's earnings are expected to grow this year but at a slower rate compared to Meta's 2023 recovery year. Analysts project the Facebook parent company will post earnings of $20.06 per share in 2024, according to FactSet, up 34% from 2023.

How Much Money Is Meta Losing On The Metaverse?

Where else is Meta spending big? The metaverse. Despite its focus on AI, Meta officials say the company is committed to building products for the virtual world of the metaverse.

"Two emerging technologies — AI and the metaverse — represent Meta's biggest long-term bets on the future," Meta Chief Technology Officer Andrew Bosworth wrote in a December blog post. "And in 2023 we began to see these two technological pathways intersect in the form of products accessible to huge numbers of people."

But the metaverse has been a costly bet for the social media giant. Last year, its Reality Labs division had an operating loss of $16 billion, compared to $13 billion and $10 billion losses in 2021 and 2022.

Next year, analysts project Reality Labs will post an operating loss of $19 billion, according to FactSet.

But the company did see some progress in its latest quarter. Sales for Reality Labs surpassed $1 billion in the fourth quarter of 2023 for the first time. The category was helped by the launch of Meta's latest VR headset, the Quest 3.

Meanwhile, research firm IDC estimates that Meta powered more than 60% of all global augmented- and virtual-reality headset shipments in the final three months of 2023. The Quest 3 powered a big step up for Meta compared to the 35% market share IDC estimated for the company in the fourth quarter of 2022.

But Meta is now facing off with a big name competitor for VR headsets.

Meta Vs. Apple

Meta competes for digital advertising dollars with Google and Amazon, as well as smaller social media platforms such as Pinterest and Snapchat-parent Snap (SNAP).

But the company's most intense rivalry these days is with Apple.Changes to Apple's privacy policies that started in 2021 took a huge bite from Meta's sales by making it harder to track user activity and sell ads.

Now, Apple is making its own virtual-reality play with the Vision Pro headset. Apple — with its hardware bona fides as the creator of the iPhone and iPad — has brought more attention to the space, and could crowd out Meta's efforts.

But Zuckerberg says he is unimpressed. In an unusual move, he posted a video on Instagram of himself in February reviewing the rival product. "After using (the Vision Pro), I don't just think Quest is the better value," Zuckerberg said. "I think that Quest is the better product, period."

Meanwhile, Meta also recently announced it would pass on a 30% service charge from Apple to businesses that buy boosted posts on its apps. Meta contends that "boosting" posts is a type of advertising, which Apple does not collect fees on. Apple, however, declared in 2022 that boosts are a type of in-app purchase. Meta encouraged businesses to instead boost posts through their browsers.

Technical Analysis Of Meta Stock

Meta stock's technical ratings remain stellar after the company's strong earnings report this month.

The IBD Stock Checkup tool shows Meta stock with a Relative Strength Rating of 96 out of a best-possible 99, indicating the stock has outperformed most of the market over the past 12 months.

Meta stock also holds a best-possible IBD Composite Rating of 99. The score means Meta stock currently tops nearly all other stocks in terms of key performance metrics and technical strength.

Further, Meta stock holds an Accumulation/Distribution Rating of B-. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates more buying than selling by institutions.

Meanwhile, Meta stock is on several IBD stock lists, including Tech Leaders, IBD 50, Big Cap 20 and the premium IBD Leaderboard list.

But with shares closing at 481.07 on Friday April 19, Meta stock is currently extended well beyond its last proper buy point, which was 326.20 from a consolidation pattern, according to IBD MarketSurge.

Here is a guide to understanding IBD's rating system.

Meta Market Cap

You can check for Meta's current stock price here. Meta's market cap is $1.23 trillion, as of market open April 22. Here is how the stock has grown over time:

*Prices as of market open April 22.

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