It seems everyone wants to talk about the “Magnificent Seven.” These seven stocks – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla – stand as the largest and most significant in the market. While all have their merits, two have truly shone bright over the past 20 months. Nvidia, the tech powerhouse, isn’t the only one stealing the spotlight.
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The Magnificent Seven’s Performance in the Last Two Years
Let’s delve into how the Magnificent Seven stocks fared since the onset of 2023. With the skyrocketing demand for artificial intelligence systems, it’s no shocker that Nvidia leads the pack. However, the surprising front-runner, overshadowing the rest, is Meta Platforms.
Setting Nvidia aside, Meta has outshined its peers. Over the past 20 months, Meta’s shares surged by a whopping 334%, leaving Amazon, the next top performer, trailing at 113%.
What’s propelling this divergence between Meta and the rest of the Mag 7? Let’s explore.
The Unique Edge of Meta Platforms
To begin, let’s unravel what Meta does and how it rakes in the cash. The company runs social networks like Facebook and Instagram, leveraging ad sales to amass around $150 billion in annual revenue.
Contrast this with other Mag 7 companies – Apple banks heavily on iPhone sales, Microsoft boasts a diverse tech conglomerate, Amazon holds the largest cloud services provider title, and Tesla specializes in electric vehicles. Only Alphabet aligns with Meta, operating Google Search and YouTube, but even so, there are stark contrasts. While Alphabet thrives on ad revenue, it channels this through search functionality rather than a social media feed like Facebook or Instagram.
The pivotal difference emerges when examining a crucial metric: free cash flow.
As observed, both Alphabet and Meta amped up their free cash flow impressively over the past decade. However, Meta has surged ahead in the last 18 months. Several factors contribute to this.
Firstly, Meta is sprinting ahead with a revenue growth rate of 22% in its most recent quarter – nearly double the pace of Alphabet at 13% during the same period.
Secondly, Meta is scaling down on expensive projects, with a notable 20% reduction in spending earmarked for Reality Labs – the segment tasked with crafting Meta’s metaverse rendition.
Lastly, beyond revenue growth and cost optimization, Meta’s business is exceedingly profitable, ranking third among the Mag 7, trailing only Nvidia and Microsoft.
So, Should You Invest in Meta Platforms?
Indeed, Meta Platforms isn’t a one-size-fits-all investment. While the stock now offers dividends, the
in today is whether Meta Platforms is still a sound investment considering all the indicators signaling its consistent upward trajectory.
Analyzing the Investment Potential of Meta Platforms
Meta Platforms offers a meager 0.4% dividend yield, unlikely to excite value-focused investors or those reliant on substantial investment income. However, beneath this unassuming surface lies a gem of an investment opportunity for those willing to ride the waves of time and capitalize on its burgeoning sales and escalating free cash flow. In essence, Meta Platforms presents itself as a stellar choice for investors with a long-term horizon, promising robust returns over the years to come.
Assessing the Viability of Investing $1,000 in Meta Platforms
Before plunging into Meta Platforms’ shares, one must pause and reflect:
The esteemed analysts at the Motley Fool Stock Advisor recently spotlighted a curated selection of the 10 best stocks poised for exceptional growth… and intriguingly, Meta Platforms failed to make the esteemed lineup. These handpicked stocks are predicted to harvest substantial profits in the foreseeable future.
Consider the historical instance when Nvidia clinched a spot on this distinguished list back on April 15, 2005… had you ventured $1,000 into this tech titan at our endorsement, you would be sitting atop a staggering $650,810!*
Flaunting an accessible roadmap to prosperity, the Stock Advisor equips investors with key insights for sculpting a flourishing portfolio, delivers routine analyst updates, and unveils two fresh stock recommendations each month. Since its inception in 2002, the Stock Advisor service has quadrupled its returns, trumping the benchmark S&P 500*.
*Current as of September 3, 2024
