<\/p>\n
Meta Platforms (META) delivered a quarter that most businesses would be happy to take.<\/p>\n
For perspective, Meta posted its Q1 earnings report on April 29, 2026, covering the quarter ended March 31, 2026.<\/p>\n
The headline numbers impressed, delivering another double beat, with operating income coming in much stronger than expected.\u00a0<\/p>\n
Unfortunately for the social media giant, Wall Street was focusing mainly on what’s ahead, particularly how it plans to continue building its AI future.<\/p>\n
Shares dropped 8% to 9% post earnings, and are down more than 7% year to date, despite being up 14% this month, according to Seeking Alpha.<\/p>\n
Nevertheless, Bank of America analyst Justin Post remained bullish.\u00a0<\/p>\n
He reiterated a buy rating on Meta while raising his price target to $835 from $820 on the back of the tremendous strength of Meta\u2019s core ad business and its growing AI opportunity.<\/p>\n
The problem is that AI is expensive.<\/p>\n
What overshadowed everything was Meta once again raising its capex to fuel its relentless AI buildout. Nevertheless, BofA backs the broader story, though it\u2019s becoming a case of near-flawless execution.<\/p>\n
Meta Q1 earnings at a glanceMeta Platforms blew past Wall Street expectations on both the top and bottom lines, posting a superb GAAP EPS of $10.44, which beat estimates by $3.78, while revenue rose 33.1% year over year to $56.31 billion.Advertising was the primary growth driver, with ad sales jumping 33% to $55 billion, while Family of Apps sales skyrocketed 34% to $55.9 billion.Meta guided for Q2 sales of $58 billion to $61 billion, with the midpoint of $59.5 billion most in line with market expectations.\u00a0On top of that, it kept its full-year expense forecast unchanged at $162 billion to $169 billion, while lifting the capex outlook to $125 billion to $145 billion.Reality Labs remained a drag, losing a whopping $4.03 billion, while family daily active users slipped sequentially amid internet disruptions in Iran and WhatsApp restrictions in Russia.
\nSource: Seeking Alpha
\nBofA sees Meta\u2019s AI spend paying off<\/p>\n
Meta\u2019s AI spending is massive, to say the least, but BofA analysts still feel the core business is strong enough to back it all up.<\/p>\n
At the core of it, BofA believes AI-driven gains are translated into the company\u2019s primary advertising engine, and will scale as large language models become more ingrained into the ad stack.<\/p>\n
It\u2019s important to understand that Meta isn\u2019t spending into a weak business.<\/p>\n
BofA sees 2026 revenue rising to $254.6 billion, with 2027 revenue climbing to $311.3 billion.<\/p>\n
The rationale has three major parts:<\/p>\n
Better ads: BofA expects deeper LLM integration, which improves ad performance while attracting more incremental ad spending.More shots on target: Threads, Meta AI, Marketplace, messaging, and subscriptions will create new monetization channels.Attractive valuation: At about 18 times revised 2027 GAAP EPS, Meta currently trades below its 21 times historical average.<\/p>\n
The engagement numbers also help a ton.<\/p>\n
BofA notes that AI-powered recommendations led to a 10% increase in time spent on Facebook, while total video watch time jumped more than 8% globally in Q1.<\/p>\n
Consequently, BofA ended up raising its 2026 EPS to $34.12 and 2027 EPS to $34.46, which shows the company still sees Meta\u2019s tremendous AI buildout as an investment, rather than a problem.<\/p>\n
Meta earnings history<\/p>\n
Meta\u2019s recent earnings performance shows consistent beats across both lines, with sales hovering above 20% in each of the past four quarters.<\/p>\n
That said, here\u2019s how Meta has fared over the past four quarters.<\/p>\n
FQ1 2026: EPS of $7.31 beat by $0.49, revenue of $56.31 billion beat by $755.41 million, and revenue grew 33.08% year over year.FQ4 2025: EPS of $8.88 beat by $0.70, revenue of $59.89 billion beat by $1.42 billion, and revenue grew 23.78% year over year.FQ3 2025: EPS of $7.25 beat by $0.58, revenue of $51.24 billion beat by $1.83 billion, and revenue grew 26.25% year over year.FQ2 2025: EPS of $7.14 beat by $1.28, revenue of $47.52 billion beat by $2.68 billion, and revenue grew 21.61% year over year.
\nSource: Seeking Alpha<\/p>\n
Bank of America raises its Meta price target after earnings but flags heavy AI spending concerns ahead.<\/p>\n
David Paul Morris/Bloomberg via Getty Images<\/p>\n
Wall Street price targets for Meta Platforms stockJPMorgan cut its price target on Meta Platforms to $725 from $825.UBS lowered its price target on Meta Platforms to $865 from $908.TD Cowen cut its price target on Meta Platforms to $800 from $820.Bernstein lowered its price target on Meta Platforms to $850 from $900.Truist cut its price target on Meta Platforms to $840 from $900.Guggenheim lowered its price target on Meta Platforms to $800 from $850.
\nSources: Benzinga, TipRanks
\nRisks still hang over Meta\u2019s AI story<\/p>\n
Though for the most part, BofA\u2019s Meta call leans bullish, its long-term case (backed heavily by AI) comes with serious risks.<\/p>\n
The first and most obvious concern is spending.<\/p>\n
Meta Platforms just raised its capex to $125 billion-$145 billion, with BofA estimates at $130 billion for the year.<\/p>\n
For more color, according to GuruFocus, Meta\u2019s capex-to-operating-cash-flow ratio is 0.59, 48% higher than its 10-year median of 0.40.<\/p>\n
That level of investment works if AI continues improving engagement and ad performance, but also raises the bar for returns.\u00a0<\/p>\n
The second aspect to consider is flexibility.<\/p>\n
Meta still gets roughly 98% of its sales from digital ads, while we\u2019re seeing its fixed cost jump due to AI infrastructure and data centers.<\/p>\n
Supporting that is the fact that Meta stock is trading at 5.72 times its forward book value (showing how asset-heavy a business is), which is 201% higher than the sector median.\u00a0<\/p>\n
So if there\u2019s any slowdown in ad spending on the back of the macro backdrop, margins could take a big hit.<\/p>\n
Additionally, there\u2019s growing competition from OpenAI and incumbents, limited or virtually zero buybacks in Q1, and legal overhang from the youth-safety regulatory scandal, which is pressuring usage and monetization.<\/p>\n
Related: 5-star analyst delivers stunning Micron stock price target<\/p>\n
#Bank #America #resets #Meta #stock #price #target #earnings<\/p>\n","protected":false},"excerpt":{"rendered":"
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