By Angela Palumbo
Meta Platforms stock, the only on in the Magnificent Seven in positive territory this year, still faces risks on the regulatory and economic fronts.
The stock has risen 3.1% in 2025, while Microsoft has dropped 7.5%, Amazon.com is down 8%, Apple has declined 12%. Alphabet is off 13%, Nvidia has fallen 16%, and Tesla has tumbled 31%. The only other time Meta outperformed the other six stocks year to date through March 27 was in 2016, according to Dow Jones Market Data.
Tech has had a hard year as worry about how President Donald Trump's tariffs will affect the economy prompts investors to step back from riskier investments. The Nasdaq Composite index has dropped 6.9% this year, but while Meta is well below its 2025 peak, it remains in positive territory.
Large tech companies like Meta, Microsoft,and Alphabet have highlighted plans to spend tens of billions of dollars on artificial- intelligence initiatives. Investors seem most confident that Meta will get an immediate return on that money. The company offers AI for its advertisers, which is expected to boost revenue growth as advertisers use AI to learn about customers and personalize their offerings.
Meta makes most of its money through advertising. In 2024, the company reported advertising revenue of $160 billion, 22% more than in 2023. Earnings increased 60%, compared with Microsoft's 22% in fiscal 2024 and a 39% gain at Alphabet.
Monness, Crespi, Hardt analyst Brian White wrote in a research note Thursday that "we believe Meta is well positioned to benefit from the digital ad trend, expand the platform's reach, and innovate with gen AI; however, regulatory scrutiny persists, and the macro remains fragile."
He rates the stock as a Buy with a $775 price target. Shares were down 0.8% at $606.13 on Thursday as the S&P 500 slipped 0.4%.
Meta faces a trial in April after the Federal Trade Commission sued Facebook, alleging that it is illegally maintaining a personal social networking monopoly through "a years-long course of anticompetitive conduct," including by buying Instagram and WhatsApp. Meta didn't immediately respond to a request for comment on Thursday, but has argued in the past that it faces competition from a range of other companies, like TikTok, YouTube, and Snapchat.
TikTok has been a continuing problem for Meta because young people have flocked to the video-sharing app. The challenge had been expected to disappear because the U.S. government passed a law banning TikTok unless the company separated from ByteDance, its Chinese owner, but Trump has suspended the ban until April 5.
That leave the future of TikTok still up in the air. Trump has offered to lower tariffs on China if the country approves the sale of the social-media app.
The economy is another danger. Digital ad spending is "highly sensitive to the vicissitudes of the economy," White wrote. "Essentially, history has proven there is no place for ad-driven business models to hide during a downturn."
If advertisers pull back their spending, Meta could feel the pain. But most analyst remain optimistic. Of the 72 surveyed by FactSet, 62 say the stock is a Buy, eight say rate it at Hold and two say it is a Sell.
"With substantial Capex (estimated $60-65bn in 2025, comparable to hyperscalers), we believe optimism around Meta's expanding AI capabilities and the potential for new AI-driven services could help maintain a healthy valuation multiple for the stock," wrote BofA Securities analyst Justin Post. He rates the stock at Buy with a price target of $765.
Meta stock currently trades at 23.5 times the per-earnings expected over the next 12 months, compared with its five-year average of 21.4 times.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 27, 2025 13:39 ET (17:39 GMT)
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