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Tech companies entered the earnings confessional this week after two stellar years riding the artificial intelligence (AI) wave. However, 2025 looks like a different ballgame for tech names as the AI rally is now getting tested after the release of DeepSeek’s low-cost AI model.
Meta Platforms (META) gained over 1.5% on Jan. 30 after the company posted impressive numbers for the fourth quarter. The stock surged to a record high of over $710 but could not hold on to those levels and eventually closed below $700. Meta CEO Mark Zuckerberg described 2025 as a “big,” “intense,” and “pivotal" year during the Q4 earnings call.
Meta has notched a 19% rally in 2025 which makes it the best-performing “Magnificent 7” stock this year. Is it still a buy?
Zuckerberg Sees 2025 as a Big Year
Early in his comments during the Q4 earnings call, Zuckerberg said 2025 “is going to be a really big year.” He added, “I know it always feels like every year is a big year, but more than usual, it feels like the trajectory for most of our long-term initiatives is going to be a lot clearer by the end of this year.” Here’s why the Meta CEO is so optimistic about the company’s outlook in 2025 and beyond.
- Meta AI: Meta AI is the most widely used AI assistant, with 700 million monthly active users, which Zuckerberg expects will rise to 1 billion this year. He sees 2025 as a pivotal year for AI and says this year it might be possible to build an “engineering agent that has coding and problem-solving abilities of around a good mid-level engineer.”
- AI Glasses: According to Zuckerberg, 2025 “will be the year when we understand the trajectory for AI glasses as a category.” He said it would be a “defining year” for gauging the potential market for these glasses and their position as the next computing platform. Meta has bet big on AI glasses and virtual reality but these products aren't yet contributing meaningfully to its revenues. However, the company expects these to be long-term drivers.
- Threads Monetization: Meta has started testing ads on its Threads platform, and while it is not expected to be a major revenue contributor this year, Zuckerberg expects Threads to become a “leading discussion platform,” with a user count swelling to 1 billion over time.
- A Decision on TikTok: We should finally see a decision on TikTok this year. President Donald Trump gave a 75-day reprieve to the ByteDance-owned company and several entities ranging from Microsoft (MSFT), Larry Ellison, Elon Musk, and even MrBeast are touted as possible suitors for the app. While Zuckerberg expects Reels – that the company launched to fend off competition from TikTok – to keep growing, it will be crucial to watch the decision on TikTok as the app is among the key competitors for Meta.
- Metaverse: Zuckerberg termed 2025 as a “pivotal” year for the metaverse and added that a “number of the long-term investments that we’ve been working on that will make the Metaverse more visually stunning and inspiring will really start to land.” Since 2020, Meta has lost over $60 billion on building the metaverse that Zuckerberg sees as central to its long-term plans.
- Relationships with Governments: Trump wasn’t a big fan of the company ahead of the November election. However, Meta has warmed up to Trump and Zuckerberg has praised the new administration. During the earnings call, he said 2025 will be a “big year for redefining our relationship with governments.” Notably, Meta ended its third-party fact-checking program earlier this year and moved to a Community Notes model. While some fear that the pivot could drive away advertisers, the company said that it hasn’t seen any “noticeable impact” so far on advertiser spend. In yet another sign of Meta warming up to the new administration, Zuckerberg said the Community Note model is working well for X, which is owned by Elon Musk.
Meta Stock Price Prediction
After Meta’s Q4 earnings report, multiple brokerages raised the stock’s target price with Pivotal Research raising it to a Street-high of $875. Benchmark upgraded the stock from a “Hold” to a “Buy” while raising the target price to $820, which is among the highest targets. Overall, Meta has a “Strong Buy” rating and analysts have been impressed by its strong execution over the last couple of years after posting its first yearly revenue decline in 2022.
Should You Buy Meta Stock?
Meta’s diluted earnings per share (EPS) rose by 60% last year which was preceded by a 73% rise in 2023. After two years of stellar growth, Meta’s growth is expected to slow down significantly this year amid higher expenses, including toward rising headcount, infrastructure costs, and depreciation expenses arising from the rapidly rising capex towards AI.
While Meta did not provide a full-year forecast, analysts are modeling a mere 6% rise in its 2025 EPS which they forecast will then rise by 12% in 2026. Bank of America however believes that despite Meta’s earnings deceleration, a higher valuation multiple is justified.
Meta stock trades at over 27x its expected earnings over the next 12 months, above its historical average.
However, I would stay put with Meta as the company is setting the stage for future years where AI and the metaverse will help drive its earnings. While the company’s earnings growth might be muted this year, advancements in AI and the metaverse should help support the stock. Positioning itself on the “right” side of the political spectrum won’t harm Meta, either. Overall, while we might not get to see the stellar gains in Meta as we saw over the previous 2 years, the stock still looks like a buy even as investors might need to tone down their expectations for 2025.
