Needham & Company has upgraded Meta Platforms (META) from Sell to Hold, signaling a shift away from its previously bearish stance. However, the firm stopped short of a bullish call, citing ongoing concerns about capital allocation and rising business risks that could limit near-term upside.
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Needham Points to Key Risks
Needham didn’t give Meta a Buy rating, citing concerns about its unfocused strategy, which could waste capital and increase risk. The firm also pointed to ongoing margin pressure, limited free cash flow, and high employee stock compensation compared to peers.
Needham’s four-star analyst Laura Martin believes that Meta’s increasing number of employees and rising costs per employee are leading to slower improvements in labor productivity. In her view, this trend could limit future gains in the stock price, which is why she isn’t ready to rate the stock a Buy. She also noted that consensus estimates may underestimate the true impact of labor costs and dilution.
In addition, Needham opted not to take a bullish stance on Meta, citing the company’s rising capital expenditures and structural cost disadvantages compared to rivals like Google (GOOGL), Amazon (AMZN), and Microsoft (MSFT), which own their cloud infrastructure. The firm also flagged ongoing regulatory risks tied to privacy, antitrust issues, and content moderation as key concerns.
On a positive note, Needham raised its full-year 2025 outlook, now expecting 14% revenue growth and a 6% rise in EPS, both higher than its previous forecasts.
Is Meta a Good Buy Right Now?
On TipRanks, META stock has a consensus Strong Buy rating among 46 Wall Street analysts. That rating is based on 42 Buys, three Holds, and one Sell assigned in the last three months. The average META price target is $721.28, which is roughly in line with current levels.
