Meta shares UP after tech giant reports $13.5bn profit 73%

Meta Platforms, Inc., the parent company of Facebook, Instagram, and WhatsApp, recently reported a staggering profit of $13.5 billion for the latest quarter, marking a remarkable 73% increase compared to previous financial periods. This impressive financial performance has led to a notable rise in Meta's share prices, reflecting investor confidence in the company's strategic direction and operational efficiency. The surge in profitability can be attributed to several factors including enhanced advertising revenues, improved cost management practices, and increased engagement across

The advertising sector has experienced a resurg its platforms.ence post-pandemic as businesses seek to reestablish their market presence. Meta has effectively capitalized on this trend by leveraging its vast user base and sophisticated algorithms to deliver targeted advertisements that yield higher returns for advertisers. As companies allocate more budget towards digital marketing initiatives, Meta's ability to provide measurable outcomes has positioned it favorably within the competitive landscape of online advertising.

Meta reiterated that it believes the computing capacity it is building can be used for various tasks, with the flexibility to shift wherever the best opportunities emerge, a similar view that Alphabet has shared. We aren’t convinced Meta will earn strong returns on its infrastructure investment, but we expect the firm will continue to generate strong cash flow regardless of the direction AI takes. We were also pleased the firm maintained its expense forecast for the year. We are increasing our fair value estimate to $450 from $400.

Analysts at KeyBanc Capital Markets reiterated an Overweight rating on META stock after the report and raised their price target from $540 to $560. 

"We believe Meta's 2Q print reinforced the core business is seeing AI returns today while AI assistants and agents create returns over the medium term," they said.

Despite its rebrand from Facebook to Meta in October 2021 to reflect its metaverse ambitions, Meta remains a social media company at its core, with its apps like Facebook, Instagram and WhatsApp accounting for 99% of total sales. And within apps, Meta makes about 99% of its money off of advertisements. Meta runs a similar digital ad-based tech operation to Google parent Alphabet, which generates about three-fourths of its revenue from ads, though it generates about twice as much ad revenue than Meta.

Meta stands out from other tech firms that have AI ambitions because it already brings in a massive amount of revenue from digital advertising," Williamson said in an email. "It's not trying to build a new business from scratch. And unlike Google, which is grappling with making changes that will impact its core ad business, most of Meta's AI investments are either aimed at making advertising on its properties work better, or at building new features that could eventually become revenue drivers."

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Sarah H

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