In the field of artificial intelligence, investors may not be able to ignore Facebook's parent company, analysts say$Meta Platforms (META.US)$Its CEO Mark Zuckerberg has led the social media giant to lay a solid foundation at the cutting edge of artificial intelligence. Zuckerberg has said the company's artificial intelligence roadmap requires it to establish a “large-scale computing infrastructure.” However, in the face of competition from other tech giants and facing high valuations after the stock price soared, some analysts are also wary of upcoming earnings.

On April 18, Meta released an early version of its latest large-scale language model, Llama 3, which has been integrated into the company's artificial intelligence system, Meta AI. Meta AI will be built into all of the company's apps, including Facebook, Instagram, and WhatsApp, and will be accessible in all search boxes on these platforms.

Zuckerberg is facing competition from companies such as Amazon (AMZN.US) and Google's parent company Alphabet (GOOGL.US), which also want a share in the field of artificial intelligence. This week is an important week for tech giants. Meta, Tesla (TSLA.US), Microsoft (MSFT.US), and Alphabet will all announce financial reports.

So far, the second quarter has been pretty rough for tech stocks so far. The stock price of Nvidia (NVDA.US), the darling of artificial intelligence chips, plummeted 14% last week, and the total market value of the so-called “Magnificent Seven” evaporated by 1 trillion dollars. TheStreetPro analyst James “Rev Shark” Deporre pointed out that after Netflix (NFLX.US)'s good performance triggered a bad response, “people are increasingly worried that even strong reports are not enough.”

Analyst: 'Fierce Artificial Intelligence Strategy' Will Boost Meta

The Meta platform will release its first-quarter earnings report after the US stock market on Wednesday. Analysts surveyed by FactSet expect Meta earnings of $4.32 per share for the first quarter, with revenue of $36.1 billion. Earnings per share for the same period last year were $2.20, and revenue of $28.6 billion. “The market is expected to report strong results, but it is worrying that prices already reflect this, and it is likely that the rapid growth rate will cool down,” Deporre said.

In February of this year, Meta announced adjusted fourth-quarter earnings of US$5.33, with revenue of US$40.1 billion, compared to Wall Street's expectations of US$4.94 and US$39 billion; a year ago, Meta reported revenue of US$32.2 billion, or US$1.76 per share, which meant that revenue increased 25% year-on-year, and earnings tripled.

Analysts at Macquarie Securities Research are optimistic about Meta's performance. In an April 22 report subtitled “Irresistible to Zuckerberg,” the agency stated: “Zuckerberg's intense open source AI strategy is probably the most powerful commercialization force for the AI model, as the Llama 3 70b-Instruct is a freely available GPT-4 level model that can run on consumer-grade hardware.”

The analyst wrote: “We think Meta has shown that unless competitors can show real stepped function improvements in model power and performance, it can destroy proprietary underlying AI model economics.” They didn't rate the company's stock.

Allegedly, the OpenAI company behind Microsoft-backed ChatGPT will launch its newest chatbot, ChapGPT5, sometime this year. Macquarie analysts said that if ChapGPT5 “fails to achieve the hype, we think Zuckerberg's progressivism about the development of artificial intelligence may be correct.” “However, if GPT-5 provides an improvement of the order of magnitude, it could change the world,” the agency said.

Some analysts are “slightly cautious” about the company's earnings

Investment agency Roth MKM gave the Meta platform a “buy” rating before the company announced its first-quarter results, with a target price of $500. However, the investment firm said it was also “slightly cautious” about the stock after a 36% increase so far this year.

The analyst told investors in a research report that the 2024 quarterly revenue pace is a major unresolved debate among investors due to stricter comparisons, a gradual slowdown in growth momentum, and European regulations.

According to reports, in February of this year, Meta was subject to a privacy complaint, and eight EU consumer groups asked regulators to take action against the Facebook owner for violating EU privacy rules when collecting user data. Complaints filed by consumer groups in the Czech Republic, Denmark, France, Greece, Norway, Slovakia, Slovenia, and Spain to their respective countries' data protection authorities added to previous dissatisfaction with Meta's large amount of user data.

On April 17, the European Data Protection Commission, the EU's privacy regulator, stated that Meta and other large online platforms should allow users to use their services for free and not place targeted ads.

KeyBanc analyst Justin Patterson lowered the company's target price for the Meta platform from $575 to $555 and reiterated the stock's “overbearing” rating. “From the expansion of Meta Assistant to the release of Llama 3, Meta continues to make progress in artificial intelligence,” he said in a research note.

In light of advances in artificial intelligence, we're curious to know how management considers returns and capital expenses. He said it is possible to achieve a year-on-year increase in ad revenue of more than 20% in the second quarter, but he also said that growth may slow in the second quarter.

Patterson said that Meta's guidance on the revenue impact of the Middle East unrest is broad, which may cause investors to panic, especially if the excellent performance of the first quarter slows down. “Compared to the fourth quarter, we are more cautious about possible surprises in terms of revenue guidance,” the analyst said.