Facebook parent Meta Platforms is hosting its first-ever LlamaCon event dedicated to its AI efforts. It kicks off a busy 48 hours that includes the tech giant's first-quarter earnings report Wednesday. Meta stock was slightly higher in Tuesday trading.
But shares of the Magnificent Seven stock are still down overall for the year. Meta stock has reeled from the uncertainty surrounding President Donald Trump's tariffs policy and a trade war with China. Chinese e-commerce retailers are a major source of advertising revenue for Meta's Facebook and Instagram.
"The ad business broadly is tied to economic growth and, given all the tariff issues and uncertainty, we should expect growth to slow for the next few quarters unless something meaningful changes on tariffs," Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, told Investor's Business Daily in an email.
That will put extra focus on how Chief Executive Mark Zuckerberg describes the current market for Meta and his vision this year for the trillion-dollar tech giant. The company's revenue guidance in particular could dictate how the market responds to Meta's report.
Meta Q1 By The Numbers
Overall, analysts expect Meta to post Q1 earnings of $5.23 per share, up 11% year over year. Sales are projected to rise 13% to $41.3 billion, according to FactSet.
BofA Securities analyst Justin Post wrote Monday that Google's YouTube ad performance and checks with ad-buyers indicate the top-end of Meta's first quarter revenue guidance ($41.8 billion) is "achievable."
Additionally, the timing of Trump's April 2 tariff announcement will likely mean that Meta's first quarter results are less in doubt.
"Q1 was likely another solid quarter for Meta, because the impact of tariffs hadn't yet kicked in," said Debra Aho Williamson, an analyst with Sonata Insights, in a research note Monday. "Q2 will be a different story, as investment from China-based advertisers is likely to plunge."
Wall Street is likely to be more focused on Meta's revenue guidance for the current, June-ending second quarter. The consensus estimates for analysts project Meta will guide for sales of $43.8 billion, representing 12% year-over-year growth.
"We expect some macro conservatism in the 2Q guide and expect an outlook at $40.5 billion to $44.0 billion," Post added in a client note. Post rates Meta stock a buy with a 640 price target.
Meta's AI Spending: Will It See Cuts?
Meta has committed to spending between $60 billion and $65 billion in capital expenditures this year, mostly focused on AI. Analysts don't expect cost cuts there, however.
"We don't expect Meta to pull back much on its capex initiatives given the importance of AI, but see ample leverage potential in Reality Labs where Meta spent roughly $20B in 2024 despite only generating $2 billion in revenue," wrote Jefferies analyst Brent Thill in a client note Monday. Reality Labs is the division focused on Meta's metaverse efforts, including headsets.
Zuckerberg is expected to discuss Meta's AI initiative at the company's first-ever LlamaCon event today.
"We expect Meta executives to focus on the capabilities of the recently announced Llama 4 series of models, including launches for the Reasoning and Behemoth editions," wrote New Street Research analyst Dan Salmon in a recent client note. "Llama 4 Maverick and Llama 4 Scout were made available on April 5 but were met with mixed reviews in the tech community."
The event is an "important junction for the company to make the case for Llama models following the release of the latest Gemini and Gemma models, DeepSeek, and OpenAI's O4 models," Salmon added.
Meta Stock Retakes 21-Day Line
Meta stock was up a fraction at 550.13 on the stock market today. Shares have gained more than 13% since the start of last week, helped by hopes that the trade war with China will ease. The gains pushed Meta stock back above its 21-day moving average though shares remain below its 50-day line.
Meta stock has shed 6% year to date, compared with its 194% surge in 2023 and 65% gain last year. Meta has an IBD Composite Rating of 88 out of a best possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
