Key insights
- Meta is expected to report earnings after market close Wednesday, with options pricing suggesting a potential 6.5% swing in the stock price. Analysts anticipate strong revenue growth but limited profit upside due to increased AI compute costs. Overall sentiment remains bullish, but scrutiny over AI spending returns is expected.
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Meta Platforms (META) is scheduled to report earnings after the market closes Wednesday, and traders anticipate a big move from the social media giant's stock following the results.
Recent options pricing suggests that shares of the Facebook and Instagram parent could swing as much as 6.5% by the end of the week. A move of that size based on the stock's price as of midday Tuesday could send the shares as high as $711, approaching the peak of the rally that followed the previous earnings report in January. The low end of that range would put shares around $625.
Meta shares are up slightly since the start of the year, climbing back into positive territory in recent weeks alongside a broader tech rally. Meta shares have also been lifted by new deals and product announcements including its latest AI model, bouncing back from the losses they suffered after a California jury found Meta and Alphabet's (GOOGL) YouTube liable for creating products with features designed to addict children.
Meta, along with the other big tech firms reporting earnings this week, will likely face renewed questions about their massive AI spending plans as investors and analysts have started looking for proof that the hundreds of billions will generate returns.
Oppenheimer analysts recently wrote that Meta is likely to report strong revenue growth, but said that the company faces limited profit upside as higher compute costs for Meta's AI models could offset the revenue gains and Meta's recent cost-cutting layoffs.
Analysts estimate that Meta's first-quarter revenue grew more than 30% year-over-year to $55.5 billion, while earnings per share are expected to come in at $6.68, up about 4% from the same time a year ago.
Analysts remain overwhelmingly bullish on Meta stock. All 20 analysts with current ratings tracked by Visible Alpha call the social media giant a "buy." Those analysts have an average price target of $865, upside of nearly 30% from current levels and well above last August's record close of $790.
Meta shares were down 1.5% at $668 in midday trading Tuesday, tracking a broader decline in technology stocks. (Read Investopedia's full coverage of market activity here.)
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