Meta Platforms: The Rising Star of the ‘Magnificent Seven’ Meta Platforms: The Rising Star of the ‘Magnificent Seven’

Photo of author

By Ronald Tech

With the rise of artificial intelligence (AI), the “Magnificent Seven” stocks might now officially be the most talked-about companies in the stock market. Bank of America analyst Michael Hartnett included the seven renowned American tech giants – Apple (AAPL), Amazon (AMZN), Alphabet (Google’s parent company) (GOOGL), Meta Platforms (META) (formerly Facebook), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) – in this list.

Though the AI wave has accelerated the growth of these companies since last year, causing their stocks to skyrocket, AI isn’t the only reason to like them. Over the last few years, these seven have represented innovation and profitability, while maintaining their strong market position.

The Performance of the ‘Magnificent Seven’

Following their remarkable streak in 2023, the majority of these seven stocks have risen significantly this year, as well – with a few notable exceptions: 

  • Apple: down 11.4%
  • Amazon: up 16.9%
  • Alphabet: down 3.4%
  • Meta Platforms: up 44.9%
  • Nvidia: up 86.4%
  • Microsoft: up 8.9%
  • Tesla: down 27.5%

Besides Nvidia, Meta Platforms appears to stand out, having significantly outperformed the S&P 500 Index’s gain of 7.6%. Let’s find out if Meta is the best of the “Magnificent Seven” stocks to buy now.

www.barchart.com

Meta Platforms Is On The Right Track

Until October of last year, investors were wondering if Meta would be able to join the $1 trillion market cap club alongside some of the other tech titans. As of today, with a market cap of $1.3 trillion, the social media tech company is officially part of the club.

While initially popular just for Facebook, Meta now has an empire of wildly accepted social media platforms such as Instagram, WhatsApp, Messenger, and newly introduced Threads. According to CEO Mark Zuckerberg, over 3.1 billion people use at least one of Meta’s applications.

According to Statista, three of Meta’s platforms are among the top five most popular social media networks globally. In 2023, Facebook reported $3.07 billion in monthly active users (MAU).

This massive consumer loyalty is driving Meta’s revenue and profits. In the latest fourth quarter, its Family of Apps (FoA) segment, consisting of its social media platforms, generated $39.0 billion in revenue, accounting for 97% of total revenue. The segment’s operating income stood at $21.0 billion, a growth of 97% year-over-year.

Sky Is The Limit For Meta Stock

Aside from Quest 3, Meta released several AI-powered products last year, including the Meta AI-powered Ray-Ban Meta smart glasses and generative AI stickers, among others.

Furthermore, the Reality Labs segment is slowly recovering. It has more scope in the expanding global metaverse market, which is expected to be worth $1.3 trillion or more by 2030.

See also  Rivian's Road Ahead: Analyzing the Impact of the VWAGY Deal and Investor Day Highlights

The company is also seeing strong growth on the WhatsApp Business platform. What’s more, Threads reported around 130 million active users in 2023. Meta’s








Meta Platforms: A Stock Analysis

The Rise and Potential of Meta Platforms Stock

Meta’s Financial Performance and Strategies

Chief Financial Officer, Susan Li, mentioned potential monetization opportunities for Threads in the future. With social media being Meta’s dominant business, the company heavily relies on advertising revenues. In 2023, Meta’s ad revenue surged to $131.9 billion from $113.4 billion in 2022, despite a challenging ad market. Experts predict a recovery in the ad sector this year, contributing to Meta’s growth. The company closed 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 New Status as a Dividend Stock

In a positive turn in Q4, Meta announced itself as a dividend-paying stock due to its substantial free cash flow of $11.5 billion. The company initiated its first quarterly dividend of $0.50 per share. With increasing earnings and free cash flow, investors can anticipate regular dividend payments. Additionally, Meta revealed a $50 billion expansion to its share repurchase initiative.

Management forecasts Meta’s revenue for the first quarter of 2024 to range from $34.5 billion to $37 billion, aligning with analysts’ projections.

Looking ahead, analysts foresee a 17% year-over-year revenue increase to $158.4 billion in 2024. Earnings per share (EPS) are expected to grow by a significant 34.4% to $19.98. Further, in 2025, both revenue and earnings are anticipated to rise by 12.4% and 16%, respectively. Meta’s stock currently trades at approximately 21 times the projected 2025 earnings which seems justifiable given its long-term AI potential, compared to Amazon and Microsoft trading at 32x and 30x forward earnings respectively.

Market Analysts’ Evaluations of Meta Stock

Among the 44 analysts covering Meta stock, 39 recommend a “strong buy,” one advises a “moderate buy,” three suggest a “hold,” and one proposes a “strong sell.” The stock is close to its average price target of $500.98. However, the highest estimated target of $575 implies a potential 12% upside in the next 12 months.

In a group including Nvidia, Alphabet, Microsoft, and Amazon – all experiencing rapid growth due to AI – it is challenging to single out Meta Platforms as the standout performer. Nevertheless, I view Meta as a highly promising AI investment opportunity. As Meta delves deeper into its AI capabilities and taps into unexplored segments, there might be greater growth prospects than initially anticipated. In summary, Meta remains a solid stock for long-term investment.