Meta price target raised on stronger ad outlook, improving profitability

Oppenheimer analysts raised their price target for Meta Platforms to $775 from $665, citing a stronger advertising market and improved profitability. The firm increased revenue estimates for Q2, Q3, and Q4 by 4%, 9%, and 3% respectively, and EPS estimates by 8%, 15%, and 5%. While projecting continued digital ad market share gains, Oppenheimer highlighted the risk of Meta falling behind in AI development, leading to projected 2025 and 2026 capex of $68 billion and $85 billion, respectively.

Analysis

Oppenheimer analysts have raised their price target for Meta Platforms Inc. to $775 from $665, reflecting a more optimistic outlook on the digital advertising market and the company's improving profitability. This revised target suggests an approximate 10.4% upside from Meta's current share price of around $702. The upgrade is underpinned by increased revenue estimates for the second, third, and fourth quarters by 4%, 9%, and 3% respectively, alongside anticipated earnings per share (EPS) growth of 8%, 15%, and 5% for the same periods. Oppenheimer now forecasts Meta's revenue to grow by 17% in 2025 and 15% in 2026, indicating sustained market share gains in digital advertising, albeit at a potentially slower rate than observed in the preceding two years. Projected EPS for 2025 is $25.41 (6% year-over-year growth) and $28.23 for 2026 (11% year-over-year growth). However, this positive outlook is tempered by significant long-term risks associated with Meta's AI development, where Llama 4 is perceived as a disappointment. Consequently, Meta is expected to incur substantial capital expenditures, projected at $68 billion in 2025 and $85 billion in 2026, driven by investments including the $14.3 billion acqui-hire of Scale AI and the formation of a new superintelligence team, to bolster its Large Language Model capabilities.

Key Decisions for Investors

• Investors should consider the positive near-term catalyst from the upgraded price target and stronger advertising revenue forecasts provided by Oppenheimer.
• It is crucial to weigh the projected revenue and EPS growth against the substantial and increasing capital expenditures ($68 billion in 2025, $85 billion in 2026) earmarked for AI development, which may impact free cash flow and overall profitability.
• Monitor Meta's progress in AI model innovation closely, particularly the performance of future Llama iterations and the integration of Scale AI, as lagging in this critical area is identified as a key long-term risk despite current advertising strength.