Meta Platforms, known as META, is set to release its second-quarter earnings report on Wednesday, July 30. Morningstar highlights the importance of Meta’s AI investments in driving value. The firm’s advertising Advantage+ tool is praised for driving ad spending and returns. Investors are watching Meta’s capex plans closely, with a fair value estimate of $770.
Meta has been investing heavily in AI talent, which is crucial for managing large spending. The firm’s strong core business in advertising (DigAds) is key to investor tolerance. Meta is currently considered marginally undervalued, with a focus on continued monetization and revenue growth across platforms like Facebook and Instagram.
Morningstar gives Meta a 3-star rating and believes the stock is undervalued compared to their fair value estimate. The firm’s sales growth is expected to come from improved ad monetization in regions like Asia and the Middle East. Meta’s economic moat is considered wide due to its strong network effect, despite ongoing investments in AI.
Financially, Meta is in a strong position with significant cash reserves and a profitable advertising business. The firm’s investments in AI may increase capital expenditure, but the advertising business generates substantial cash flow. However, there is a High Uncertainty Rating due to investments in unprofitable ventures like Reality Labs.
META Bulls highlight Meta’s strong advertising business, improved algorithms, and access to high-quality user data. They see potential for increased ad inventory growth and improved monetization. However, META Bears are concerned about the firm’s investments in unprofitable ventures, legal challenges, and dependency on Chinese ad spending.
Morningstar’s analysis provides insights into Meta Platforms’ performance, investments, and outlook. Investors will be closely watching Meta’s earnings report and future strategic moves in the evolving digital advertising landscape.
Read more at Morningstar: Going Into Earnings, Is Meta Stock a Buy, a Sell, or Fairly Valued?