Meta User Base, AI-Powered Ad Growth Drive Analyst Optimism

Rosenblatt analyst Steve Frankel maintained a Buy rating on Meta Platforms Inc META with a price target of $811.

The stock is currently featured among the best ideas for the first half of 2025, reflecting key themes across Rosenblatt’s research universe.

Meta is in the midst of an impressive and durable artificial intelligence-driven growth renaissance, he says.

Revenues rose 22% in the first nine months of 2024 after growing 16% in 2023 and dipping 1% in 2022.

Also Read: Instagram’s Ad Revenue Could Hit $32 Billion by 2025, Driving Meta’s Growth: Report

The growth is principally advertising, which accounts for 98% of sales, and AI-driven. AI is driving up daily usage on Facebook and Instagram, bolstering reel traction and improving ad efficiency.

Meta uses AI to adjust ad loads better, improve action sequences tied to targeting and executing ads, and help advertisers create and manage campaigns, Rosenblatt explained.

Ad revenue rose 19% in the third quarter of 2024, only 300 bps slower than the 22% growth of the second quarter of 2024, despite an 11.5 percentage point stiffer comparison.

From here, comparisons are steadier, suggesting recent traction can continue.

Frankel estimates 19% revenue growth in the fourth quarter of 2024, within the 12% to 20% guidance. We sustain that growth estimate into 2025.

With this revenue growth, Meta has room to absorb more investment.

The analyst assumes capex would increase 20% in 2025 to $46.6 billion, nearly flat as a percentage of sales. Hea also expects expense growth of 14% in 2025, accelerating from an 11% rise in 2024, and has adjusted EBITDA margins rising 110 bps to 62.6%.

Meta has nearly 3.3 billion people using its family of services daily. Its revenue growth affords more AI investment growth than others, a backdrop allowing AI-driven marketing services to improve more than others. With its business primarily performance marketing, a better marketing mousetrap supports share gains, the analyst says.

One risk is global trade volatility. Out-of-region revenue (mainly China and Asia marketers buying ads in the US) was 7% of Meta ad revenue in 2023 and dropped to 5% in the third quarter of 2024.

One could imagine a trade war generating disruption once President-elect Trump officially takes office. However, it is not clear that Trump wants that. He may be threatening tariffs to seek concessions. In a trade war, Chinese and Asian marketers like Temu and Shein could also react by sourcing more locally, supporting continued marketing.

Meta And TikTok

TikTok could be a hedge.

If the Supreme Court allows the law requiring a TikTok sale or ban to stand, then TikTok’s fate would rest in Trump’s hands, and he would have the ability to interpret and enforce legislation or push for new legislation.

His recent statements of support for TikTok suggest that he believes trade concessions from China could be won in return for keeping the app.

Alternatively, a whole-out trade war could result in Trump allowing a TikTok ban to come into effect.

Price Action: META stock is up 2.55% at $600.15 at last check Monday.

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