Meta Platforms Rises 17% Year to Date: Buy, Sell or Hold META Stock?

Core Insights - Meta Platforms (META) shares have increased by 16.9% year to date (YTD), outperforming the broader Zacks Computer & Technology sector and advertising peers like Alphabet (GOOGL), Amazon (AMZN), and Snap (SNAP) [1][8] - Meta, Alphabet, and Amazon are projected to capture approximately 50% of global ad spending by 2028 [1] Stock Performance - Shares of Alphabet, Amazon, and Snap have decreased by 11.1%, 5.6%, and 23.9% YTD, respectively, while the broader sector has seen a slight increase of 0.1% [2] - META shares are trading above both the 50-day and 200-day moving averages, indicating a bullish trend [6][7] AI Integration and Advertising Revenue - Meta's integration of artificial intelligence (AI) across its platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads, is enhancing user engagement and ad revenues [3][8] - The company has over 3.43 billion daily users, with AI usage reaching approximately one billion monthly users globally [3] - Recent updates to Meta AI are expected to improve engagement through more personalized responses [3] Advertising Tools and Performance Metrics - The deployment of Meta's machine learning system, Andromeda, powered by NVIDIA, has resulted in over 6% recall improvement and more than 8% ad quality improvement [14] - The new Generative Ads Recommendation model has increased conversion rates by 5%, and there has been a 30% increase in advertisers using AI creative tools [16] - Improvements in recommendation systems have led to a 7% increase in time spent on Facebook, a 6% increase on Instagram, and a 35% increase on Threads over the past six months [16] Revenue Growth and Future Prospects - Meta's focus on social commerce through its platforms has contributed to a 34% year-over-year growth in Family of Apps other revenues, reaching $510 million [17] - The Zacks Consensus Estimate for second-quarter 2025 earnings is $5.83 per share, reflecting a 12.98% year-over-year increase [18] - For 2025, capital expenditure is expected to be between $64 billion and $72 billion, driven by Gen AI initiatives and core business [20] Valuation Concerns - META shares are considered overvalued with a Value Score of D, trading at a forward 12-month Price/Sales (P/S) ratio of 8.79X, compared to the Zacks Internet Software industry's 5.61X [10] - Alphabet, Amazon, and Snap have lower forward P/S ratios of 6.03X, 3.05X, and 2.25X, respectively [10] Investment Outlook - Despite the strong growth prospects driven by AI, concerns remain regarding the monetization of new platforms like Threads and Meta AI [21] - The current Zacks Rank for META is 3 (Hold), suggesting that investors should wait for a more favorable opportunity to accumulate the stock [22]