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Shares of Meta Platforms (META) have reversed some of their gains and are down about 16.5% over the past month. The broader tech sector selloff, led by macroeconomic uncertainty, has contributed to this downturn. Including the recent pullback, Meta stock has lost 25% of its value from its 52-week high.
While Meta stock has pulled back, its underlying business remains solid, reflected through its solid ad revenue growth and increasing user engagement across its social media platforms. Moreover, Meta’s aggressive investments in artificial intelligence (AI) have started to pay off. AI-powered enhancements are improving user experiences, increasing engagement, and strengthening the effectiveness of Meta’s ad offerings.
Given the company’s solid fundamentals, analysts are bullish about its prospects and see solid upside potential over the next 12 months.
Meta’s Strong Financial Performance and User Growth
Meta’s impressive financial performance continues to be anchored by its growing user base and expanding advertising business. The company reported an average of 3.35 billion Family daily active people (DAP) in Q4 2024, reflecting a 5% increase year-over-year. This growth in engagement was complemented by a 6% rise in ad impressions for the quarter.
Advertising remains Meta’s dominant revenue stream. In Q4 2024, ad revenue soared to $46.8 billion, marking substantial 21% year-over-year growth. The impressive performance was driven by a 14% increase in the average price per ad in Q4. The combination of rising ad prices and volume reflects strong advertiser demand for Meta’s platform, reflecting its ability to monetize user engagement effectively. With continued strength in these areas, the outlook for 2025 remains optimistic.
User Engagement and AI-Powered Enhancements
Meta’s social media platforms are witnessing steady growth in daily active users. Video content has emerged as a key growth driver and is a significant contributor to this engagement surge. Instagram’s video consumption is growing rapidly, with solid gains on Facebook in the U.S.
To sustain this momentum, Meta is focusing on maximizing its video viewership and prioritizing original content on Instagram. These efforts will likely drive user engagement and long-term retention and increase monetization opportunities.
Meta’s success with Threads in 2024 further strengthens its engagement strategy. The company is refining its recommendation to highlight recent posts and top creators while personalizing feeds.
Meanwhile, AI continues to be a major focus, with over 700 million monthly actives on Meta AI. The company is rolling out updates to refine personalized responses, leveraging interactions on Facebook and Instagram to enhance its AI-driven services.
Meta’s Monetization Strategies to Power Ad Revenue
Meta is enhancing its monetization strategies by expanding advertising opportunities across its platforms. The company is optimizing ad placement to integrate ads seamlessly into user experiences. Innovations in ad ranking systems, driven by advanced AI models like Andromeda, have significantly improved the quality and personalization of advertisements. This system has led to an 8% enhancement in ad quality, ensuring that users see more relevant ads while boosting advertiser returns.
Additionally, Meta’s Advantage+ initiative is reshaping digital advertising. The adoption of Advantage+ shopping campaigns has scaled rapidly, with revenues surpassing a $20 billion annual run rate and marking a 70% year-over-year increase in Q4.
The company is also expanding ad placements to previously unmonetized surfaces, such as Threads. Although the rollout of ads on Threads will be gradual, it presents a long-term revenue growth opportunity. Meta remains committed to optimizing ad supply across its services, ensuring that advertisements appear at the most relevant times and locations.
Analysts See Upside in Meta Stock
Wall Street analysts are confident about Meta’s growth potential and maintain a “Strong Buy” consensus rating. Their optimism stems from the company’s ability to keep users engaged, leverage AI to drive user engagement and monetization and deliver solid advertising revenue.
With its strong fundamentals and a bullish outlook from analysts, Meta stock is set for a solid rebound. Analysts’ average price target of $746.09 suggests about 32% upside potential from current levels.
