Can META's Focus on Driving User Engagement Push the Stock Higher?

Meta Platforms’ META focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user engagement to boost ad revenues. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.48 billion daily users. 

AI push is helping Meta Platforms offer content that is interesting and useful, eventually driving engagement. Improvement in content quality, driven by META’s recommendation system, has led to a 5% increase in time spent on Facebook and 6% on Instagram in the second quarter of 2025. Video engagement improved with Instagram video time jumping more than 20% year-over-year globally. Video time spent on Facebook surged more than 20% year over year. The launch of AI video editing tools across Meta AI and the new Edits app are noteworthy developments.

However, does improving engagement boost META stock’s appeal to investors? Let’s find out.

New Safety Features and Tools to Drive Up META’s Prospects

META is frequently introducing new features across its platforms to drive more conversation and user engagement. For instance, Threads users can now attach up to 10,000 characters of text to a post and any text so attached can be read directly in the app. Users can share a link to content from other platforms in the body of the main post, giving more options for conversations. In July, the company added a feature that allows users (ages 18 and older) to send DMs (between Threads followers or mutual followers from Instagram) directly in the app. META also introduced the Threads highlighter, which brings to focus the trending topics. 

For Instagram, META has launched several new features and tools like repost, interactive map and Friends tab in Reels. The repost option helps Instagram users share reels and posts, which will appear in friends’ feeds and a dedicated repost tab on profiles. The interactive map allows friends to share locations and explore posts, reels and stories tagged to places. The Friends tab in Reels makes it easy to see what content friends are enjoying.

Apart from new tools and features, Meta Platforms has been focusing on improving security across its platforms. META has introduced features and new anti-scam tools in WhatsApp to combat scammers. Safety features now allow WhatsApp users to review details, leave quietly, or mute notifications when a new contact adds the user to an unknown group. For individual WhatsApp chats, Meta Platforms is testing warnings when users message someone outside their contacts.

For Facebook, the company launched passkeys on Facebook for mobile devices, which now allows users to verify their identity and log in to their account more securely compared with traditional passwords. Introduction of Teen Accounts has been a key catalyst boosting security on Instagram. META has expanded Teen Accounts to Facebook and Messenger platforms.

META’s initiative to boost user engagement and safety measures is expected to drive up the user base, aiding advertising revenues. The Zacks Consensus Estimate for third-quarter 2025 advertising is pegged at $48.44 billion, indicating more than 21% growth over the figure reported in the year-ago quarter.

META’s Q3 Earnings Estimate Revision Trend is Positive

The Zacks Consensus Estimate for third-quarter 2025 earnings is pegged at $6.74 per share, up by a nickel over the past 30 days, suggesting 11.8% growth from the figure reported in the year-ago quarter.
 

Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote

Meta Platforms expects total revenues between $47.5 billion and $50.5 billion for the third quarter of 2025, including 1% tailwind from favorable forex. The Zacks Consensus Estimate for third-quarter 2025 revenues is pegged at $49.39 billion, suggesting 21.7% growth from the year-ago quarter’s reported figure.

META’s Price Performance and Valuation

META’s shares have appreciated 28.5% year to date (YTD), outperforming the broader Zacks Computer & Technology sector, as well as its advertising peers, including Alphabet GOOGL, Amazon AMZN and Snap SNAP. Meta Platforms, Alphabet and Amazon are expected to absorb roughly 50% of the projected global ad spending by 2028.

Shares of Alphabet and Amazon have increased 25.2% and 6.9%, respectively, on a YTD basis. However, Snap shares dropped 32.9%. The broader sector appreciated 15.4% over the same timeframe.

META Stock’s YTD Performance

META shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

META Shares Trade Above 50-Day and 200-Day SMAs

However, META shares are overvalued, as suggested by the Value Score of D. In terms of the forward 12-month price/sales (P/S), META is trading at 8.71X, a premium compared with the broader sector’s 6.73X, Amazon’s 3.27X, Alphabet’s 7.84X, and Snap’s 1.95X.

P/S Ratio (F12M)

Here’s Why You Should Hold META Stock Right Now

Meta Platforms is spending heavily on expanding AI infrastructure. For 2025, capital expenditure is expected to be between $66 billion and $72 billion, driven by META’s Gen AI initiatives and core business. 

Operating expenses are expected in the $114-$118 billion range, with headcount expected to increase within infrastructure. Regulatory concerns in the United States and Europe, along with tariffs and premium valuation, make the stock a risky bet, despite growing advertising revenues.

META currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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