3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) is the owner of the world’s most engaging social media apps namely Facebook and Instagram, and two of the most commonly used messaging apps, WhatsApp and Messenger. The company is now eyeing to become a leader in AI chatbots. The stock was held by 219 hedge funds during Q2 2024, with total stakes worth $42.54 billion. Citadel Investment Group is the top shareholder of the company, with a position worth $6.27 billion.
Meta Platforms, Inc. (NASDAQ:META) has proved to be a leading technology company through its decade-long history of generating record revenues. Over the past 10 years the company has grown its top line by 31%, its bottom line by 36% and its levered free cash flow by 26%.
Much like its historic growth, the company continued to deliver robust growth during the most recent quarter i.e. Q2 2024. Its revenue grew 22% year-over-year to reach $39.1 billion. Management believes that two main factors drive revenue for the company. Number one is its ability to deliver an engaging experience and the second is its effective monetization of the engagement. And the quarterly results show that the company performed well in both the indicators.
The advertisement revenue was also up 22% year-over-year to reach $38.3 billion. On the other hand, even after being in business for a long time, Meta Platforms, Inc. (NASDAQ:META) still witnessed an increase in daily active users which surpassed 3.2 billion, with WhatsApp alone reaching over 100 million monthly active users.
The company is now focusing on artificial intelligence to enhance user experience and challenge the Magnificent Seven to become the most used AI assistant. The competitive edge of Meta Platforms, Inc. (NASDAQ:META) lies in the fact that AI is not one of its core businesses.
Yes, you read it right. The fact that AI is its core business and instead it generates most of the revenues from core social media platforms gives the company leverage to work on its AI large language model without the threat of losing revenue. Management has leveraged this edge to gain another strategic advantage by making its Llama model code open-source, allowing outside developers to make optimizations and improvements. Management believes open-source has the potential to improve the company’s language model much faster as compared to closed-sourced models.
In addition, Meta Platforms, Inc. (NASDAQ:META) Ray-Ban Meta Glasses and Quest 3 have become a hit sooner than expected and are contributing revenue growth to its Reality Labs division. The Reality Labs division witnessed a 27.8% year-over-year increase in revenue, amounting to $353 million during the quarter.
Based on the strong performance across the board, the net income also improved by an impressive 73% to reach more than 13 million. Moreover, the company also generated around $10.9 billion in free cash flow, giving it financial backing to invest in its AI ventures and return to its shareholders. Looking ahead, management believes next quarter revenue to be between $38.5 to $41 billion.
Polen Focus Growth Strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: Home Depot, Meta Platforms, Inc. (NASDAQ:META), and AbbVie. Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
