Meta Platforms (NASDAQ:META) reports Q3 results on Oct 21, and the stock is on our list of the top 10 stocks in Trump’s latest stock portfolio. Trump’s portfolio made its biggest trade in the whole Oct 8 filing in Meta, a purchase of $5 million to $25 million on Aug 21. The portfolio trades far more than any member of Congress, so we compared its trades with Nancy Pelosi’s to find the stocks both bought. Click to see the four picks.
Bull Case
Bulls see AI paying off first in Meta’s ad business. AI recommendations keep people in Meta’s apps longer and help advertisers reach the right buyers, so Meta shows more ads and charges more for each one. In the second quarter, ad impressions rose 14% and the average price per ad rose 12%, which helped revenue grow 28%. Big investors back this view. Ken Fisher’s Fisher Asset Management raised its Meta stake by 2% in the second quarter, and Meta ranks fifth in our list of his 10 best AI stocks. Click to see the other nine picks. Meta is also building new businesses on the same spending. Its Muse AI agent topped the App Store ahead of ChatGPT, and the new Meta Enterprise Platform sells Meta’s AI tools to businesses, which Mark Zuckerberg called the next major pillar of the company. Dan Niles of Niles Investment Management thinks Meta could build a public cloud as its next big business. Click to read why he still sees momentum in the stock.
Bear Case and Concerns Around Muse
Bears point to the cost. Meta raised its 2026 capital spending forecast again in July, and free cash flow has almost disappeared. It is expected to fall sharply and not recover until at least fiscal 2028. Profit is also under pressure. Meta missed second quarter earnings estimates by about 14% because of legal charges and severance costs, and analysts expect third quarter earnings per share to remain under pressure.
Muse brings in little revenue so far, and long-term monetization remains a question mark, BNP Paribas said in a note. Hedge funds are also cutting back. The number of hedge funds holding Meta fell from 262 to 254 in the second quarter, according to Insider Monkey’s database. Click to see which hedge funds own Meta. The stock also fell after each of its last two earnings reports.
Pixabay/Public Domain
Should You Buy Ahead of Earnings?
Buying before earnings is a bet on one report, and the setup could be risky. Meta reports on Oct 21 after the market closes. Analysts expect third quarter revenue growth of about 24% but earnings per share below last year’s. The stock has rallied sharply from its March low, and it fell after each of its last two reports. Meta has beaten revenue estimates in each of the last four quarters, so the main questions are capital spending and free cash flow. Long-term investors who like the AI story can buy a small starter position now and add after the report, when the spending plans are clear. Investors who want less risk can wait for the report. Rowan Street Capital highlighted Meta in its Q2 investor letter and said the company’s fundamentals outpace its stock rally. Check the full letter here. Starting small is one way to manage the risk in Meta Platforms.
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