Facebook and Instagram owner Meta Platforms (NASDAQ: META) is no stranger to strong advertising growth and that is helping fuel its outstanding returns, especially lately.

But even after explosive gains over the last year, analysts at Wells Fargo like the company’s prospects enough to maintain an overweight (buy) rating on the shares. The firm slightly trimmed its price target from $609 to $600, but the new 12-month target still shows an upside of 15% over the current share price of $520.

Why buy Meta Platforms stock
Wells’ analysts cited internal research into Meta’s advertising performance that points to strong growth in the near term. The analysts expect the company to report strong results for the first quarter and issue solid guidance for Q2.

In the fourth quarter, Meta’s revenue grew 25% year over year, driven by a 21% increase in ad impressions and a 2% increase in price per ad across its family of apps.

A key theme for the social media leader this year is investing in artificial intelligence (AI) tools to improve its ad systems and products. In Q4, Meta rolled out tools to build ads with text and images using generative AI, and it planned to make these tools more broadly available toward the end of the first quarter.

Meta is loaded with cash to invest for growth. Free cash flow more than doubled in 2023 to $43 billion. Growing profitability and opportunities to drive strong advertising growth from AI explain the stock’s run over the last year, and why it may continue to hit new highs.

Despite the stock’s climb, it still trades at a reasonable valuation, with a forward price-to-earnings ratio of 25. Assuming Meta continues to report strong earnings results, the stock has what it takes to hit the analyst’s price target within the next year or so.