The “Magnificent Seven” stocks, including Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla, have been the darlings of the stock market, especially with the surge in artificial intelligence (AI) dominance. Bank of America’s Michael Hartnett labeled them as such, recognizing their innovation, profitability, and market prowess.
Despite the AI wave propelling their growth in the past year, these companies have displayed a mix of performance in 2023, with Meta Platforms and Nvidia outshining with significant gains.
The Standout Success of Meta Platforms
Meta Platforms, formerly Facebook, has embodied a remarkable transformation, ascending to a trillion-dollar valuation and bolstering its social media empire with platforms like Instagram, WhatsApp, and Messenger. The company’s reach now extends to over 3.1 billion people through its suite of applications.
With three of its platforms ranking among the top five globally, Meta’s user base remains robust. The company’s revenue engine, the Family of Apps segment, exhibited a stellar performance in the latest quarter, driving substantial income and revenue growth.
The Meteoric Trajectory of Meta Stock
Meta’s foray into AI innovations, such as the Meta AI-powered Ray-Ban smart glasses and the growth in its Reality Labs segment, showcases a promising future amidst the evolving metaverse landscape. The company’s strategic moves have positioned it to tap into a burgeoning market set to surpass $1.3 trillion.
Noteworthy advancements in products like Quest 3 and a burgeoning user base on platforms like WhatsApp Business and Threads are further propelling Meta Platforms forward. The company’s resilience and foresight in embracing AI and metaverse trends underscore its potential for sustained growth and relevance in the tech industry.
Meta Platforms: A Steady Ship in the Turbulent Seas of Tech Stocks
Social media being its dominant business, Meta largely depends on advertising for revenue. In 2023, Meta’s ad revenue stood at $131.9 billion, an increase from $113.4 billion in 2022. While the ad market struggled last year, experts anticipate it to recover this year, adding to Meta’s growth.
On the balance sheet, it finished the quarter with $65.4 billion in cash, cash equivalents, and marketable securities, as well as $18.4 billion in long-term debt.
Meta’s Strategic Financial Moves
Another positive development in Q4 is that Meta is now a dividend-paying stock. Thanks to its massive free cash flow balance of $11.5 billion, Meta announced its first quarterly dividend of $0.50 per share. With the increase in earnings and FCF, investors can expect dividend payments to continue on a quarterly basis. The company also announced a $50 billion increase to its share repurchase program.
Management anticipates Meta’s first quarter of 2024 revenue to land in the $34.5 billion to $37 billion range. Analysts’ estimates are in the same range.
Looking ahead, analysts expect Meta’s revenue to increase by 17% year-over-year to $158.4 billion in 2024. Additionally, EPS is expected to grow by a massive 34.4% to $19.98. Furthermore, in 2025, revenue and earnings are expected to jump by 12.4% and 16%, respectively.
Meta’s stock is trading at about 21 times 2025 projected earnings, which seems reasonable for a stock with outstanding long-term AI opportunities. Meanwhile, its peers Amazon and Microsoft are trading at 32x and 30x forward earnings, respectively.
Analysts’ Sentiments Towards Meta Stock
Out of the 44 analysts covering Meta stock, 39 have a “strong buy” recommendation, one rates it a “moderate buy,” three suggest it’s a “hold,” and one suggests a “strong sell.”
Meta is trading close to its average price target of $500.98. Its Street-high estimate of $575, however, implies a potential upside of about 12% in the next 12 months.
Insights on Investing in Meta Platforms Stock
In the Magnificent 7 group, Nvidia, Alphabet, Microsoft, and Amazon are also expanding rapidly and experiencing explosive growth, thanks to AI. Given that, it is difficult to single out Meta Platforms as the crown jewel.
However, I believe the company is one of the most promising AI investments to make now. As Meta continues to explore its AI capabilities, along with untapped potential in some of its segments, it could see more growth than anticipated. All in all, Meta remains an excellent stock to buy and hold for the long haul.
