Should Meta Platforms Stock Be in Your Portfolio Pre-Q2 Earnings?

Core Insights - Meta Platforms (META) is expected to report second-quarter 2025 results on July 30, with projected revenues between $42.5 billion and $45.5 billion, indicating a year-over-year increase of 14.77% [1][9]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for second-quarter revenues is $44.84 billion, reflecting a 14.77% increase from the previous year [2]. - The consensus estimate for earnings per share stands at $5.83, suggesting a growth of 12.98% year-over-year [2]. Advertising Revenue Growth - Strong advertising revenue growth is anticipated, with second-quarter advertising revenues estimated at $43.94 billion, representing a 14.6% year-over-year increase [4]. - Meta's platforms, including WhatsApp, Instagram, Messenger, and Facebook, reach over three billion users daily, enhancing its position in the digital ad market [5]. AI and Engagement - META is leveraging AI and machine learning to enhance user engagement across its platforms, with AI-driven feed recommendations being a significant factor [6][17]. - The company has introduced new features in Ads Manager to optimize advertising strategies across its platforms, further attracting advertisers [18]. Financial Performance and Challenges - The Family of Apps' operating income is estimated at $22.38 billion, indicating a 15.7% year-over-year growth [7]. - However, Reality Labs is projected to incur a loss of $5.35 billion, wider than the previous year's loss, which may pressure overall margins [8]. Stock Performance - META shares have increased by 22.3% year-to-date, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software Industry [9]. - The stock is currently trading at a forward Price/Sales ratio of 8.96X, higher than the sector average of 6.7X, indicating a stretched valuation [13]. Future Prospects - META's initiatives, such as Business AI for personalized recommendations and enhanced customer interactions via WhatsApp, are expected to strengthen its market position [19]. - The company's favorable Zacks Rank 2 (Buy) and Growth Score of A suggest a strong investment opportunity [20].