Last year was a comeback year for Meta Platforms, after a disastrous 2022 for the Facebook parent company. This year, Meta stock got off to a strong start before a sharp pullback following its first quarter earnings report.
Shares of the Facebook and Instagram parent company are still ahead more than 30% in 2024, however. 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, Apple, Nvidia, Google parent Alphabet and Amazon.
But the stock lost 10.5% in a selloff after it reported first-quarter earnings and Chief Executive Mark Zuckerberg pledged to ramp up spending on Meta's artificial intelligence vision.
So is Meta stock a buy? Here's what to know about recent news and action involving Meta stock:
Meta Stock: Zuckerberg Pledges Big Spending On AI
Meta stock took a big hit on the company's first quarter earnings report in late April.
That's despite strong results for the quarter itself. The company said in a news release that it earned $4.71 per share on sales of $36.46 billion for the March-ended quarter. On average, analysts projected Meta would post earnings of $4.32 per share on sales of $36.14 billion, according to FactSet. Sales jumped 27% year over year while earnings increased 114%.
The big concern for Meta came in its guidance. The Facebook parent company paired a lower-than-expected Q2 revenue forecast with a higher-than-expected increase in projected 2024 costs.
Meta raised its guidance for 2024 capital expenditures by 12%, to $37.5 billion at the midpoint of its range. The company also upped the midpoint of its total expenses about 1%, to $97.5 billion. The high-end of Meta's capex guidance, $40 billion, would represent a 42% increase from 2023. Capex decreased 12.5% year over year in 2023.
Zuckerberg told analysts that early results from AI focused show the company "should invest significantly more over the coming years."
"The biggest surprise in the quarter was not the lower-than-expected revenue guidance or elevated capex; rather, it was that Meta will be in an investment cycle in the foreseeable future," Mizuho analyst James Lee wrote to clients following the report.
It was a surprise that was not well received by investors. Meta stock plunged more than 10.5% to close at 441.38, its lowest level since late January.
Recent Meta Stock Movement
Following the earnings letdown, Meta stock has slowly been working its way back up. Shares have gained in 10 of the 12 trading days so far in May.
Meta stock retook its 21-day moving average on May 9, according to MarketSurge charts. As of mid-day May 16, shares were hovering just below Meta's 50-day moving average.
The IBD Stock Checkup tool shows Meta stock with a Relative Strength Rating of 93 out of a best-possible 99, indicating the stock has still outperformed most of the market over the past 12 months.
Meta stock also holds a IBD Composite Rating of 96 from a best-possible 99. The score means Meta stock currently tops nearly all other stocks in terms of key performance metrics and technical strength.
But Meta stock holds a lowest-possible Accumulation/Distribution Rating of E. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates heavy selling by institutions over that period.
Here is a guide to understanding IBD's rating system.
Meta Stock: Regulation Watch
Another factor to watch for Meta is regulation. Meta shares fell in trading on May 16 after European Union regulators said the were probing Facebook and Instagram for potential breaches of online content rules for children. The regulators said they were concerned that algorithmic content feeds could "stimulate behavioral addictions in children."
A Meta spokesperson told Reuters that the company has several tools and policies to protect children.
The EU's concerns are similar to those voiced in a lawsuit filed by leaders from 42 U.S. states in October. That lawsuit alleged Facebook and Instagram harnessed "technologies to entice, engage, and ultimately ensnare youth and teens."
Meta is also facing an antitrust challenge from the Federal Trade Commission. The FTC sued back in December 2020, alleging Facebook had abused monopoly power in acquiring competitors Instagram and WhatsApp. The original lawsuit was dismissed in 2021, but the FTC filed an amended lawsuit later that same year.
In April, Meta filed to have the lawsuit dismissed ahead of a potential trial. "The FTC has failed to state a plausible claim, and the agency has done nothing to build its case through the discovery process to prove otherwise," the company said.
Meta.AI Aims To Be Leading AI Assistant
Meanwhile, Meta is pushing to become an AI leader. The company took a big step on April 18, when 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 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 that he views Meta.ai as the "most intelligent AI assistant that you can freely use."
Meta Stock: AI Push
The Meta assistant 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 the fist version of Llama, which powers 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.
Meta Stock: Wall Street Projections For 2024
For now, analysts are sticking with Zuckerberg and Meta. Of the 66 analysts following the stock, 85% of analysts rate Meta a buy, according to FactSet.
The big spending likely brought up memories of Meta's rough 2022, when shares tanked as revenue slowed and the company ramped up investments on its metaverse vision. But analysts have described this current round of spending as different, particularly because Meta's core advertising is still growing quickly.
"Without sounding overly religious, you either believe in Zuck or you don't, and we do," wrote Bernstein analyst Mark Shmulik in a client note following Meta's report. "The advertising revenue growth trajectory is as expected … and top-end of the 2Q guidance range point to 22% year-over-year (growth) against tougher compares. Who would have thought that was possible a year ago?"
For the full year, analysts project that Meta's revenue will rise 17.8% to $158.9 billion in 2024, after climbing 15.7% last year, according to FactSet. Revenue slipped 1.1% in 2022.
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.
Advertising Leader
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, 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.
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 April 24, President Joe Biden signed into law a bill that requires TikTok's Beijing-based owner ByteDance to sell the app or it will be banned.
Lawmakers and others in 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.
On May 7, ByteDance sued to block the law. The company has said it will not sell the app.
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.
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.
In the first quarter of 2024, the division lost $3.85 billion. For the full 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 efforts. 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. Revenue for Q1 was $440 million, up 30% from a year earlier.
Meta Vs Apple In VR
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. 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."
Meta Market Cap
You can check for Meta's current stock price here. Meta's market cap is $1.2 trillion, as of mid-day May 16. Here is how the stock has grown over time:
| Time Period | Meta Stock % Gain | S&P 500 % Gain |
|---|---|---|
| 2024* | 34.3 | 11.5 |
| Previous 12 Months* | 99 | 28 |
| 2023 | 194.3 | -19 |
| 2022 | -64 | 27 |
| 2021 | 23 | 517 |
| Since IPO (May 18, 2012) | 1,143 | 310 |
*Prices as of market open May 16.
