Meta stock (NASDAQ: META) recently announced its Q1 performance, with revenues and earnings significantly surpassing street predictions. It registered sales of $42.3 billion and earnings of $6.43 per share, compared to the consensus forecasts of $41.3 billion and $5.22, respectively. The firm continued to enjoy advantages from a growing user base. Additionally, its outlook for Q2 was more promising than anticipated.
META stock, which has seen an 8% decline since the start of the year (as of April 30), has exhibited performance in line with the larger NASDAQ index, which has decreased by 10%. The company’s investments in AI have begun to yield benefits in terms of increased user engagement, suggesting favorable prospects for its stock. However, if you are seeking positive returns with a smoother experience than that of a single stock, consider the High-Quality portfolio, which has surpassed the S&P and recorded >91% returns since its inception.
How Did Meta Fare In Q1?
Meta Platforms’ revenues of $42.3 billion in Q1 represented a 16% year-over-year increase, driven by a 5% uptick in ad impressions and a 10% rise in average price per ad. Meta also noted a 6% increase in its family daily active people (DAP) to 3.43 billion. The company’s primary revenue stream originates from advertising across its family of apps (Facebook, Instagram, Threads, and WhatsApp). The company is utilizing AI to enhance its ad targeting capabilities and is investing in AI-driven content generation. To support its AI strategies, Meta is undertaking considerable infrastructure investments, with anticipated capital expenditures ranging from $64-72 billion for 2025.
Not only did the corporation report higher revenues, but its operating margin also expanded to 41%, rising by approximately 300 basis points year-over-year. Increased revenues and margin growth resulted in earnings of $6.43 per share, representing a 37% year-over-year increase. Looking ahead, Meta anticipates its Q2 revenue will be between $42.5 billion and $45.5 billion. At the midpoint of this range, the sales are aligned with the street expectation of $44 billion.
What Does This Mean For META Stock?
Following the company’s impressive Q1 performance, META stock is showing upward momentum in after-hours trading. When examining the stock’s performance over a slightly extended timeframe, the appreciation in META stock over the past four years has been anything but steady, with annual returns being significantly more volatile than those of the S&P 500. The stock returned 23% in 2021, -64% in 2022, 194% in 2023, and 66% in 2024.
In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, is significantly less volatile. It has consistently outperformed the S&P 500 throughout the last four-year period. What accounts for this?Collectively, the HQ Portfolio stocks have yielded superior returns with reduced risk compared to the benchmark index; they represent a less erratic investment journey, as illustrated in the HQ Portfolio performance metrics.
Given the prevailing uncertain macroeconomic climate involving tariffs and trade disputes, can META stock see substantial growth? We estimate Meta Platforms’ valuation at approximately $702 per share, which indicates a 20% upside potential from its current level of around $580 (after market hours). Our projections are based on a 27x price-to-earnings (P/E) ratio, which surpasses META’s four-year average P/E of 22x. This elevated valuation multiple seems warranted considering the firm’s recent robust advertising growth and enhanced profitability.
Nevertheless, there are near-term risks to consider. Ongoing tariff challenges may lead to a reduction in ad spending from China, while Meta’s heavy investment in AI introduces uncertainty regarding whether these costs will ultimately yield substantial returns and significantly enhance the company’s future earnings potential.
While META stock appears to have significant growth potential, it’s beneficial to examine how Meta’s Peers perform on important metrics. You will discover other useful comparisons for different companies across sectors at Peer Comparisons.