Needham upgraded Meta Platforms, Inc. (NASDAQ:META) from Underperform to Hold on Thursday, but the analyst maintained a cautious stance on the stock as it trades near all-time highs.
What To Know: Needham analyst Laura Martin said the upgrade was based on the firm's improved expectations for revenue and margins in 2025, driven by Meta's exceptional labor productivity.
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What’s Driving Meta’s Growth?
In fact, Meta ranked first among large-cap peers in free cash flow per employee for 2024, according to Needham's checks. The performance is attributed to META's globally scaled, software-centric business model that runs on free content provided by users and leverages mobile platforms for distribution.
Expert Ideas: Despite these strengths, Martin remained cautious as Meta still faces rapidly rising capital expenditures—projected to hit $68 billion in 2025, an 84% year-over-year increase—and escalating costs.
The company's aggressive pursuit of high-cost initiatives, including GenAI, Metaverse, Scale AI and new hardware, raised concerns about capital allocation and return on investment.
Regulatory headwinds are also a concern. Meta is exposed to increasing scrutiny in both the U.S. and Europe, with potential antitrust actions and new compliance burdens that could impact operations and profitability.
Is Meta’s Valuation Overblown?
Hold Rating: The analyst pointed out that META's shares are heavily owned, with 90% of analysts rating it a Buy or Strong Buy, raising questions about upside potential at current valuation levels.
Martin said she would become more positive on the stock if it dropped to just above $600 per share, with technical support at that level.
META Price Action: Meta Platforms shares were up 1.14% at $721.71 on Thursday morning, according to Benzinga Pro.
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