What’s Next For META Stock After An Upbeat Q1?

Meta stock (NASDAQ: META) recently reported its Q1 results, with revenues and earnings well above the street estimates. It reported sales of $42.3 billion and earnings of $6.43 per share, compared to the consensus estimates of $41.3 billion and $5.22, respectively. The company continued to benefit from an increasing user base. Furthermore, its Q2 outlook was above expectations.

META stock, which is down 8% returns since the beginning of the year (as of April 30), has performed in line with the broader NASDAQ index, which is down 10%. The company’s AI investments have started to pay off with increasing user engagement, boding well for its stock. But, if you are looking for an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by William McDonald from Pixabay

How Did Meta Fare In Q1?

Meta Platforms’ revenues of $42.3 billion in Q1 reflected a 16% y-o-y rise, driven by a 5% rise in ad impressions and a 10% growth in average price per ad. Meta also reported a 6% rise in family daily active people (DAP) to 3.43 billion. Meta’s primary revenue stream comes from advertising across its family of apps (Facebook, Instagram, Threads, and WhatsApp). The company is leveraging AI to enhance its ad targeting capabilities and is investing in AI-powered content generation. To support its AI initiatives, Meta is making substantial infrastructure investments, with projected capital expenditures between $64-72 billion for 2025.

Not only did the company post higher revenues, its operating margin expanded to 41%, up around 300 bps y-o-y. Higher revenues and margin expansion resulted in earnings of $6.43 per share, up 37% y-o-y. Looking forward, Meta expects its Q2 revenue to be in the range of $42.5 billion to $45.5 billion. At the mid-point of this range, the sales are aligning to the street expectation of $44 billion.

What Does This Mean For META Stock?

Thanks to the company’s solid Q1 beat, META stock is trending higher in after-hours trading.  Looking at the stock’s performance over a slightly longer period, the increase in META stock over the last four-years has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 23% in 2021, -64% in 2022, 194% in 2023, and 66% in 2024.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment surrounding tariffs and trade wars, could META stock experience significant growth? We estimate Meta Platforms’ valuation at approximately $702 per share, representing a 20% upside from its current level of around $580 (after market hours). Our forecast is based on a 27x price-to-earnings (P/E) ratio, higher than META’s four-year average P/E of 22x. This increased valuation multiple appears justified given the company’s recent strong advertising growth and improved profitability.

However, near-term risks exist. Ongoing tariff issues may reduce ad spending from China, while Meta’s aggressive AI investments create uncertainty about whether these expenditures will ultimately prove worthwhile and meaningfully boost the company’s future earnings growth.

While META stock looks like it has ample room for growth, it is helpful to see how Meta’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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