Meta’s AI & Smart Glasses Could Drive 20%+ Upside in 2025
Meta Platforms' (NASDAQ: META) uptrend will continue because the business is evolving into an enduring, blue-chip consumer technology leader akin to Apple (NASDAQ: AAPL). Among the highlights from the Q4 report is the growing momentum with the Ray-Ban smart glasses. CEO Mark Zuckerburg says that 2025 will be a pivotal year, indicating whether this product will continue to sell millions of units annually or ramp to the hundred-million mark as the trends suggest. The takeaway is that this company can capitalize on technological trends with or without smart glasses; the success of smart glasses will only be another reason to own the stock.
Another critical detail is the advancement of Meta’s AI technology, including its AI assistant. Meta’s AI assistant is gaining traction and is the most used globally. Its leadership position will likely increase as the year progresses due to its inclusion in the Ray-Ban smart glasses platform and upcoming improvements, including customization to allow personalized AI experiences.
Meta Tops Q4 and 2024 Forecasts: Issues Solid Guidance
Meta Platforms had a strong Q4 and F2024 due to AI's impact on its core businesses. AI insights and capabilities drove revenue up by another 20.6%, outpacing MarketBeat’s reported consensus by $1.4 billion or nearly 300 basis points despite the high bar set by analysts. This is the 6th quarter of sustained, double-digit growth with a CAGR in the low 20% range, with strength driven by increased users, impressions, and revenue per ad. Daily Active People are up 5% across the Family of Apps, with impressions up 6% and revenue per ad 14%, providing significant leverage to results and earnings quality.
The margin news is also robust. The company’s AI investments are driving profitable growth and improving earnings quality. The GAAP operating margin improved by 700 basis points yearly, resulting in a 48% increase in net earnings. The $8.02 in GAAP EPS is up slightly more than 50%, aided by share repurchases. It outpaced consensus by nearly 1900 basis points and is backed up by an outlook for sustained, high-level growth in 2025.
Meta’s CFO refrained from giving full-year guidance, but the outlook is for strong full-year growth, led by a solid 12% gain in Q1. The company forecasts Q1 revenue to run near 12% at the midpoint, aligning with the analysts' forecasts but likely cautious, given the trends. Results will likely reach the high-end range or better, which is good for at least another 300 basis points of growth.
Meta's Cash Flow Is a Reason to Expect Higher Stock Prices
Meta Platform's cash flow is also improving. The company reported $13.15 billion and $52.10 billion in quarterly and yearly free cash flow, up 15% and 21%, respectively. The FCF allowed the company to build its cash pile, increase its investments, and return capital to shareholders while driving a significant increase in shareholder equity. Highlights include nearly $78 billion in cash, a net cash position relative to long-term debt, low leverage, a 20% increase in total assets, and a 22% gain in equity. The company didn’t repurchase shares in Q4 but has ample capacity; the share count is down 0.5% at the end of F2024.
The analysts cheered the news, citing the company’s success with core operations and progress in AI. MarketBeat tracked over a dozen revisions within the first 24 hours of the report, all including an increase in price target and one upgrade from Hold to Buy. The consensus of fresh revisions is that this stock is a Buy and can rise 18% or more by the year’s end. The consensus average is near $801, 23% higher than the pre-release target, with high-end targets adding 10%. Meta Platforms stock is already at all-time high levels with no clear indication of resistance, so a move to the $800 level or higher is likely.
