Meta Platforms is the IBD Stock of the Day for Tuesday. Shares of the social media titan are clearing a small shelf that followed Meta's huge Q2 earnings rally. Meta stock is approaching a $2 trillion market capitalization.
The big story for Meta this year has been Mark Zuckerberg's spare-no-costs approach to generative artificial intelligence. Meta's chief executive has pledged to spend "hundreds of billions" on AI infrastructure while also offering pay packages worth hundreds of millions to lure talent from competitors.
The Facebook founder says Meta's core digital advertising business is strong enough to support its AI bets. Meta's Q2 results backed that up. Revenue surged 22% to $47.52 billion, well ahead of analysts' estimates. Earnings jumped 38% year over year to $7.14 per share. Daily active people — Meta's measurement of daily users across Facebook, Instagram and its other apps — increased 6% to 3.48 billion.
Zuckerberg said the company is utilizing AI to improve its advertising tools and the content it recommends to users.
Meta stock rallied more than 11% to close at a record high following the report on July 30. Share have hovered near highs in trading since then.
Meta Stock Eyes $2 Trillion Market Cap
On the stock market today, Meta stock gained 3.2% to close at 790. Shares touched a record high 790.50 in early trading.
After gapping up following Meta's earnings, shares have formed a small shelf consolidation pattern. The stock is ahead about 1.5% this month. Its Relative Strength Rating, meanwhile, has climbed to 88 out of a best-possible 99. That's up from 69 three months ago.
Meta stock has an IBD Composite Rating of 96 out a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. Meta stock is on the IBD Tech Leaders list.
With its gains, Meta is approaching a $2 trillion market capitalization. Its market cap is hovering near $1.98 trillion as of Tuesday morning. Meta would join Nvidia, Microsoft, Apple, Alphabet and Amazon as the only companies above that level. Nvidia has a market cap of more than $4 trillion while Microsoft and Apple are each above $3 trillion.
Meta's 34% year-to-date gain is second-best among those tech giants. Nvidia has gained 35%.
Meta ascended beyond a $1 trillion market cap early last year — a milestone in its comeback from a deep slump in 2022.
Meta Earns 'Right To Spend'
Wall Street forecasts further gains for Meta. Roughly 86% of the 71 analysts following Meta stock rank it a buy, according to FactSet. The average price target set by those analysts is 860.86, up more than 20% from the average target price at the end of June.
JPMorgan analyst Doug Anmuth reiterated an overweight, or buy, rating for Meta and set a price target of 875 following the company's Q2 report.
"Revenue growth accelerated largely due to AI-driven engagement increases and ad improvements, and the high end of Meta's outlook suggests further acceleration in 3Q," Anmuth wrote on July 31. "Meta continues to earn the right to spend more on capex with strong core advertising performance."
Meta expects to spend roughly $69 billion on capital expenditures this year, the company told analysts last month, and $100 billion next year.
"The capex/investment pace is very aggressive, but the company is doing this from a clear position of strength," Evercore ISI analyst Mark Mahaney wrote following the report. He rates Meta as outperform with a price target of 930.
