Jim Cramer: Buy the Meta Dip, But Time It Right

Sources at CNBC have indicated that Jim Cramer is strategically upgrading Meta Platforms, viewing Thursday’s market dip as a compelling entry point. Despite a 12% share price decline following Wednesday’s earnings call, where Meta cautioned about increased capital expenditures in its AI initiatives, Cramer believes the long-term potential outweighs these short-term concerns. The “Investing Club” is upgrading Meta to a buy-equivalent 1 rating, a decision solidified following the earnings release where an $825 price target was reiterated.

The market’s initial negative reaction seems rooted in investor apprehension regarding CEO Mark Zuckerberg’s aggressive AI investment strategy. Zuckerberg articulated the need for significant upfront investment in AI capacity, assuring investors that any surplus computing power could be repurposed within other areas of the business. This argument, however, failed to resonate with Wall Street, prompting the selloff.

Cramer highlights that a substantial portion of these investments will bolster Meta’s video production capabilities, offering advertisers enhanced creative tools. This strategic move is expected to generate more content inventory across Instagram and Facebook, thereby driving increased user engagement. The CNBC team believes this will create a virtuous cycle, benefiting both advertisers and Meta, given the company’s reliance on digital advertising revenue.

While acknowledging concerns surrounding increased spending, Cramer emphasizes Zuckerberg’s “I’m gonna win no matter what” attitude. This aggressive stance, coupled with Meta’s history of innovation and market dominance, warrants a bullish outlook. The underlying financials also demonstrated strength. Meta delivered better-than-expected quarterly revenue and adjusted earnings per share (EPS). While a one-time tax charge of roughly $16 billion owing to changes related to the One Big Beautiful Bill Act impacted net income, Meta concurrently raised its revenue guidance for the current quarter.

From a technical perspective, the dip presents a potential entry point for investors. However, as noted during intraday CNBC discussions, prospective buyers might consider evaluating price action into the end of the week, allowing for market stabilization before establishing a position. The fundamental narrative remains solid; Meta’s foray into AI is not a speculative gamble but a strategic imperative to maintain its competitive edge and capitalize on the burgeoning AI landscape. Meta’s capacity to reallocate computing power should it ‘overbuy’ AI, further mitigates risk. The longer-term growth narrative fueled by AI, coupled with the short-term opportunity to capitalize on a market-driven correction, forms the crux of Cramer’s upgrade.