Facebook started off with relatively simple ad targeting, but things got interesting when they launched the like button in 2009.
People started to like everything from their favorite dog memes to movies and local bars. Facebook soon saw dollar signs, realizing all those thumbs-ups could provide advertisers with granular targeting options.
Now, Facebook's parent Meta Platforms (META) plans to use AI advertising to fuel growth. “We’re leveraging AI to provide increased automation for advertisers,” said CFO Susan Li during the July earnings call.
Meta has been updating its AI tool, Meta AI, to help advertisers create content more easily. The company recently announced that more than 1 million advertisers used its generative AI ad tools in September, creating 15 million ads and driving a 7.6% improvement in conversion rates.
Forrester Research Director Mike Proulx cautioned that Meta should not overlook the critical role of human involvement in the advertising process.
"Let’s be clear that it’s a ways off, if ever, before CMOs will simply hand over the keys to an AI agent that will autonomously generate ad creative on their behalf," Proulx said after Meta’s Q2 earnings.
Meta Platforms rosy Q3 outlook
In its second-quarter earnings report from July, Meta reported earnings of $5.16 per share, beating Wall Street's projection of $4.73. The company generated $39.07 billion in revenue, surpassing the expected $38.31 billion.
Meta provided an optimistic forecast for the third quarter, projecting revenue from $38.5 billion to $41 billion, above analysts' $39.1 billion target.
Related: Analyst revisits Meta stock price target as Facebook parent ramps AI spend
"We had a strong [second] quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year," said Zuckerberg, "We've released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we're driving good growth across our apps."
Advertising sales remain the company’s main revenue source, making up over 98% of total earnings. Fueled mainly by the Facebook and Instagram apps, ad revenue rose 21.6% in Q2 compared to the previous year.
Meta is set to report its third-quarter earnings on Wednesday, Oct. 30.
Analyst lift Meta stock price target before Q3 earnings
Meta’s sales continue to impress investors. UBS raised the Meta Platforms price target to $690 from $635 on Oct. 7, keeping a buy rating.
Ad budgets accelerated in August into September due to an uplift from a brand advertising recovery and improved consumer sentiment, the analyst tells investors in a research note pulled by thefly.com. Meta also benefited from political spending, optimization, and efficiencies, UBS says.
Guggenheim also raised the Meta's price target to $665 from $600 and with a buy rating.
Guggenheim expects investor attention on Q4’s ad-driven revenue forecast, projected at $47 billion versus the $46.2 billion consensus. Additionally, investors may look for 2025 guidance on expenses and capex and new insights on AI investment returns, the analyst says.
Guggenheim believes Meta remains the top destination for incremental ad dollars, supported by recent channel checks and industry-wide data trends in Q3.
In August, Barclays raised Meta's price target to $550 from $520 and kept an overweight rating after Q2 earnings.
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The analyst described Meta in a note as “the best pace of any company in digital advertising, with little revenue deceleration despite facing very tough comps in the second half of 2024.”
Meta Platforms traded at $592.89 per share on October 8. The stock is up more than 70% year-to-date.
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