Meta Platforms Inc-A：Solid 4Q24 results; further stepping up AI investments in FY25

Investment Rating - The report maintains a "BUY" rating for Meta, with a target price raised to US$835, reflecting a potential upside of 21.2% from the current price of US$689.18 [1][2][9]. Core Insights - Meta reported solid 4Q24 results, with total revenue increasing by 21% year-over-year to US$48.4 billion, exceeding Bloomberg consensus estimates by 3%. Net income rose by 49% year-over-year to US$20.8 billion, 18% above consensus, largely due to favorable legal accrual reductions and lower restructuring costs [1][2]. - For FY24, total revenue and net income grew by 22% and 59% year-over-year, reaching US$164.5 billion and US$62.4 billion, respectively. Management anticipates revenue growth of 8-15% year-over-year for 1Q25, with total revenue projected between US$39.5 billion and US$41.8 billion [1][2][11]. - The company is significantly increasing investments in AI, with total expenses expected to grow by 20-25% year-over-year to US$114-119 billion, and capital expenditures projected to rise by 53-66% year-over-year to US$60-65 billion [1][2][11]. Financial Performance - In 4Q24, the Family of Apps ad revenue grew by 21% year-over-year to US$47.3 billion, driven by a 6% increase in ad impressions and a 14% rise in average price per ad, aided by AI optimizations [6][11]. - The annual revenue run-rate for Advantage+ shopping campaigns surpassed US$20 billion in 4Q24, marking a 70% year-over-year increase, with over 4 million advertisers utilizing Meta's generative AI ad creative tools [6][11]. - The report outlines a forecast for FY25E total revenue of US$187.7 billion, with net profit expected to reach US$65.9 billion, reflecting a 2.1% increase from previous estimates [7][8][11]. Valuation Metrics - The target price of US$835 is based on a 32x FY25E P/E ratio, which is a premium to the sector average of 24x, indicating confidence in Meta's long-term growth potential [9][10]. - The report highlights that Meta's P/E ratio is projected to decrease from 28.0 in FY24 to 26.4 in FY25, suggesting a favorable valuation compared to peers [11].