Meta Platforms: A Strategic Entry Ahead of Earnings as AI and Tech Investments Drive Long-Term Growth

Meta Platforms (META) is poised to report Q2 2025 earnings on July 30, with investors closely watching for signs of progress in its AI and metaverse initiatives. Despite a Zacks Rank #3 (Hold) rating, the stock's strong fundamentals, bullish technicals, and transformative growth drivers argue for a strategic entry ahead of the event. Let's dissect why this could be a pivotal moment for shareholders.

Valuation: A Bargain for Growth?

Meta's current forward P/E of 23.22X (2025) sits below both the Nasdaq-100 average (32.3X) and its own industry peers. While the Zacks Rank #3 reflects concerns over regulatory risks and metaverse losses, the stock's valuation remains compelling relative to its growth trajectory. Brokerage firms' average price target of $918.00 (a 52.7% upside from the July 11 closing price of $601.23) underscores optimism.

Analyst Revisions and Earnings Momentum

The company's Q1 2025 earnings beat—with EPS of $6.43 (23.2% above estimates) and revenue of $42.31 billion (2.6% above forecasts)—has fueled confidence. Analysts have raised their consensus estimates for fiscal 2025 to $25.52 EPS and $185.8 billion in revenue, reflecting a 7% and 13% YoY growth, respectively. Long-term EPS growth of 16.1% (3–5 years) outpaces the S&P 500's 12.4%, signaling Meta's resilience in a slowing ad market.

Strategic Investments: AI and the Metaverse

Meta's $14.3 billion acquisition of Scale AI and its Llama 3 AI model are central to its growth narrative. These initiatives aim to boost ad targeting precision and compete with rivals like Microsoft's Copilot. While metaverse losses totaled $2.7 billion in 2024, the division's 3.43 billion daily active users across Facebook, Instagram, and WhatsApp highlight the scale of its ecosystem.

The metaverse's cash flow growth of 26.3% and projected 54.9% expansion in 2025 suggest operational progress. Even skeptics must acknowledge Meta's $98 billion in cash and equivalents, positioning it to weather near-term challenges while scaling AI and virtual reality.

Technical Indicators: A Bullish Setup Ahead of Earnings

Technicals paint a compelling picture:
- MACD (17.86) and all major moving averages (20-, 50-, 100-, 200-day EMAs) are bullish, with the stock trading above all.
- RSI (62.53) sits in neutral territory, avoiding overbought extremes.
- Pivot points identify $724.49 support and $739.30 resistance, with a breakout above $745.82 targeting $754.12.

Unusual options activity—8 CALLs to 2 PUTs—adds further bullish sentiment, while seasonality gives Meta a 76.92% historical chance of positive May performance.

Risks and Challenges

• Regulatory headwinds: A potential $200 billion lawsuit from Austrian privacy group NOYB over AI data use looms large.
• Metaverse losses: While cash-rich, the division's financial drag remains a concern.
• Microsoft's AI dominance: Microsoft's Zacks Rank #2 (Buy) reflects its stronger enterprise AI adoption, which could divert ad revenue.

Investment Conclusion

Despite the Zacks Rank #3 (Hold), Meta's technical setup and long-term AI/metaverse roadmap make the current price a strategic entry point ahead of earnings. A dip to the $724.49 support level would present an ideal buying opportunity, with $754.12 resistance as the first upside target.

Recommendation: Buy META on weakness below $730, with a $750 price target by year-end, while monitoring regulatory risks. For aggressive investors, consider a 5% allocation to capitalize on post-earnings momentum.

Meta's blend of cash flow, AI innovation, and user growth positions it to outperform over the next 12–18 months. While risks exist, the current valuation and technicals suggest this is a stock to own—not just hold—before earnings.

Data as of July 11, 2025. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.