'One of the best AI stocks': what Wall Street is saying ahead of Meta's report

Meta, which is aggressively increasing spending on artificial intelligence, may report its slowest quarterly profit growth in two years. Nevertheless, Wall Street remains optimistic: BofA calls Meta one of the best AI stocks, while Stifel and Guggenheim have raised their targets and forecast a 15-20% growth in quotes. Among the potential risks for the company, analysts cite inflated investor expectations and rising capex against the backdrop of large-scale hiring of AI experts and investments in infrastructure.

Meta will release its second-quarter financial results on Wednesday, July 30, after the close of trading. Investors are interested in how effectively the parent company of Facebook and Instagram monetizes artificial intelligence - both in the advertising business and beyond, writes MarketWatch. After a successful first quarter, Meta in April raised its 2025 capital expenditure forecast to a range of $64-72 billion - previously expected to be $60-65 billion, MarketWatch recalls. So market participants will be watching closely to see if the company raises that figure again and whether such spending in AI is justified.

On average, Wall Street is bracing for subdued results, with earnings expected to rise 11.5% year-over-year to $15.01 billion, the weakest growth in two years, Reuters reports citing LSEG data. Revenue growth, according to analysts' forecasts, may also be the lowest in the past seven quarters, up just 14.7% to $44.8 billion.Still, more than 85% of analysts covering Meta recommend investors buy the stock.

- On July 28, analysts at Guggenheim raised their target price on Meta's shares from $725 to $800, maintaining a "buy" recommendation, reports Investing.com. The new target implies the growth of the company's quotations by almost 15% from the closing price of the last trades. According to a Guggenheim survey of large investors, Meta remains one of the most attractive companies ahead of the quarterly report, with 27% of participants selecting it as a buy idea. Only 10% considered Meta a suitable security for short positions;

Analysts noted the stable demand for direct response advertising, which is supported by the development of the Advantage+ platform. According to Guggenheim estimates, if the trends of the first quarter continue, Meta's revenue for the second quarter may grow by 18% in annual terms and reach $46.1 billion - above the upper limit of the official forecast of the company ($45.5 billion). At the same time, analysts note Meta's growing spending on AI. 95% of investors surveyed by Guggenheim expect Meta's capital expenditures to exceed $76 billion in 2026. Guggenheim itself forecasts $82 billion.

- It's capex that's causing uncertainty in the upcoming report - especially with news of massive hiring of expensive AI talent during the quarter, said Stifel analyst Mark Kelly. Nevertheless, he raised his target price on Meta shares from $655 to $845 last week, while maintaining a Buy recommendation, reports Investing.com. Kelly's target implies a 20% increase in Meta's quotations. 

- "Based on recent statements from CEO [Mark Zuckerberg], we expect the focus of the conference call to be on AI investments and related opportunities, with possible news on Llama and AI monetization strategies," BofA analyst Justin Post said in a note in Oninvest's possession. He predicts Meta will post strong results for the second quarter of 2025, especially on revenue and EPS of $45.4 billion and $6.12, respectively. The main driver of growth will be advertising revenue, helped by the integration of AI into advertising products, the analyst said. "Given its audience reach, we continue to believe Meta is one of the best AI stocks with the potential for revenue growth as AI is integrated into the advertising platform," Post added.

Nevertheless, BofA noted the key risk - inflated investor expectations. The analyst also did not rule out raising the full-year spending forecast to $113-118 billion, especially due to rising capex and hiring in the AI space. Among the possible negative factors, Post cited weak advertising numbers, slowing Reels growth, regulatory risks in the EU and delays in launching large AI models. Overall, however, he believes Meta remains one of the top AI beneficiaries in the market, and he recommends buying the stock with a target price of $775 - that's 10% above its current market value.

- Meta will show strong revenue growth in the second quarter thanks to the increased integration of AI into advertising products - especially through Advantage+, which has become a standard option for many advertisers, according to analysts at Deutsche Bank (their note is also available to the editorial board). The analysts raised their revenue forecast from $44.3 billion to $45 billion, but noted that investors are expecting even more - revenue of up to $46.5 billion. At the same time, Deutsche Bank also drew attention to rising costs: according to them, capex for 2025 will reach $69 billion, and large-scale investments in AI, including hiring engineers, limit the potential to reduce operating costs. Nevertheless, despite the rising costs, Deutsche Bank also maintains a "buy" recommendation with a target price of $770, believing that AI will ensure the company's long-term growth.

This article was AI-translated and verified by a human editor