Bank of America revamps Meta stock forecast before earnings

Core Insights - Meta is actively positioning itself as a leader in AI, engaging in a hiring spree of AI experts and planning significant AI infrastructure developments, although some of these plans may seem unrealistic compared to competitors like OpenAI [1] - The company is exploring partnerships with Google Cloud to utilize its Gemini models for enhancing its advertising business, indicating a shift towards collaboration rather than solely relying on internal capabilities [2] - Meta has existing cloud computing agreements with Google valued at over $10 billion and is in discussions with Oracle for a potential $20 billion deal, highlighting the high costs associated with building data center infrastructure [3] Financial Outlook - Bank of America analysts predict that Meta will exceed Wall Street's Q3 estimates, forecasting revenue of $50 billion and earnings per share (EPS) of $7.30, surpassing the expected revenue of $49.5 billion and EPS of $6.69 [4][5] - For Q4, analysts estimate revenue of $58.8 billion and EPS of $8.90, again higher than Wall Street's projections of $57.3 billion and EPS of $8.12 [5] - Analysts expect continued investments in AI, projecting Meta's fiscal year 2025 expenses to range between $115 billion and $117 billion, with potential increases in capital expenditure guidance to $68 billion to $72 billion [6][7] Valuation and Investment Perspective - The analysts maintain a buy rating for Meta, setting a target price of $900 based on a 27 multiple of estimated GAAP EPS for 2026, reflecting confidence in the company's growth and AI opportunities [8] - Meta's valuation is positioned at a slight premium to the S&P 500, justified by its higher growth rate and potential in AI, with historical trading patterns showing a premium of 3 points over the S&P 500 [8]