3. Meta Platforms, Inc. (NASDAQ:META)
Third Point’s Stake Value: $600,176,880
Number of Hedge Fund Holders: 246
Loeb upped his stakes in Meta Platforms, Inc. (NASDAQ:META) by 7% in Q1 2024, ending the quarter with a position of over $600 million. In total, 246 hedge funds were bullish on Meta Platforms, Inc. (NASDAQ:META) and ended the quarter with positions worth $47 billion. Meta Platforms, Inc. (NASDAQ:META) is one of Dan Loeb’s top growth stock picks.
Meta Platforms, Inc. (NASDAQ:META) is seeing robust ad revenue growth. Its Family of Apps (Facebook, Instagram, WhatsApp and Messenger) generated ad revenue of $35.6 billion, up 27% year over year, and about 3.2 billion people use one of its apps each day. However, the company’s AR/VR business Reality Labs keeps bleeding cash and logged losses of $3.85 billion in Q1. Management said its AR/VR business is supporting its AI initiatives and it continues to be optimistic about the future of the metaverse and mixed-reality ecosystem. The company is sticking to its strategy of collaborating with eyewear brands such as EssilorLuxottica to build virtual and mixed reality headsets to boost its market share. Meta is also making progress on the AI front and successfully rolled out its AI assistant Meta AI and is currently in the process of training Meta Llama 3, a 400-billion+ parameter large language model. What’s interesting about Meta’s two long-term focus areas is the fusion of AI and mixed reality. While still in its infancy, the metaverse concept shows more promise with the addition of AI to it. Meta is integrating AI functionalities into its smart glasses which will give users access to real-time information related to their surroundings.
Meta Platforms, Inc. (NASDAQ:META) also raised its capital expenditures guidance for 2024, saying it expects CapEx to range between $35 billion and $40 billion, up from its prior guidance of $30 billion to $37 billion. The group is investing heavily in infrastructure and AI, and is reportedly working on its own in-house AI chips. By developing its own AI chips, Meta can gain a competitive advantage in the market, reducing its reliance on external providers and improving the performance of its AI applications.
Why should growth investors consider Meta Platforms, Inc. (NASDAQ:META)? The company has grown at double digits consistently over the past 10 years, growing its revenue by a CAGR of 32% and net income by 37.3%. The company has also started paying dividends and exited Q1 2024 with $16 billion in capital returns through dividends and buybacks. In a world where cash is king, Meta doesn’t lose. The company has grown its free cash flow by a compound annual growth rate of 23% over the past 10 years. In 2023, Meta’s net income was $39 billion and it ended the year with a free cash flow of $44 billion, its FCF to net income ratio is 113%. Meta is an extremely profitable company that is pioneering disruptive technologies and with its strong near-monopoly position in social media and digital advertising, we think it’s a good idea while it trades at 24.5 times its forward earnings, close to its 5-year average multiple of 23.7x.
