Shares of Metaplatforms (META 4.23%) fell to a cheap valuation in 2022 and are up almost 400% in the last two years. However, the stock still trades at a reasonable 23 times this year’s earnings estimate, which could provide further gains in 2025.

JMP Securities analyst Andrew Boone recently raised the company’s price target to $750, representing a 25% upside potential from the current share price of $599, and maintained an Outperform (Buy) rating on the company Share at. The analyst sees several reasons to be optimistic about the growth prospects of the social media market leader.

The stock may be undervalued

Meta Platforms spent $30 billion on capital expenditures last year and will continue to increase infrastructure spending due to the company’s growing free cash flow and artificial intelligence (AI) opportunities.

Boone sees AI as a big advantage for Meta’s advertising tools. On the last earnings call, Meta noted that more than a million advertisers are already using its generative AI-powered tools to create over 15 million ads in October alone.

The analyst also sees AI benefiting Meta’s Reality Labs division, particularly its upcoming Ray-Ban smart glasses. The Reality Labs business was not profitable and posted a large operating loss of $4.4 billion in the third quarter. However, Boone believes the launch of the glasses later this year will boost investor confidence in the segment’s long-term prospects.

A potential headwind for the stock is the possibility of lower near-term margin and profit growth due to the planned acceleration of infrastructure cost growth. Analysts currently expect Meta to report earnings growth of 14% for 2025, compared to the 21% expected for 2024, according to Yahoo! Finance.

But assuming Meta Platforms continues to deliver double-digit earnings growth over the long term, the stock offers great value, trading at just 23.5 times 2025 earnings estimates. It should deliver returns commensurate with the company’s underlying earnings growth, which would put the stock on track to reach $750 within the next few years.