3. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Kevin Simpson, Capital Wealth Planning founder and CIO, explained on CNBC in a recent program he he is buying more Meta Platforms Inc (NASDAQ:META) shares:
“This is a stock that we don’t think is overvalued by any means. You look at the forward PE of 25, and you think any type of double-digit earnings next year are going to be accretive to the bottom line. They are so focused on shareholder value. The initiation of the dividend, Scott made this a really unique trade for us yesterday because not only did we add it to our new growth strategy in the QVO, but we also bought it in our flagship dividend strategy. They’re buying back shares, $41 billion committed to shareholder buybacks; they reduced the float by 10% over the past three years. This is the first time—and who knows how long it will be again—where we’re buying a stock both in a growth strategy and a dividend strategy. But I think it speaks a lot to Meta, how they check off so many boxes. The advertisers now have broached over 10 million, the daily users, the monthly users are increasing year-over-year by 7%. And we also look at this as a true hardware play—the the glasses, the Meta Quest, the ray bands, and the new Orion someday down the road are legitimate products that are actually competing with Apple products. We’re really excited about this stock not as a trade but as a true company that’s continuing to grow over the next 3 to 5 years.”
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta also reported strong adoption of its Llama AI model, attracting over 500 million monthly active users across its platforms. This progress positions Meta well for robust profitability in the next two years as it scales its AI infrastructure.
Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI.
Meta Platforms (NASDAQ:META)’s clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market. Although short-term investors may be concerned about Meta Platforms (NASDAQ:META)’s increased AI spending, its forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock, after Google, within its peer group (Apple, Amazon, Microsoft, and Google).
According to some estimates, Meta Platforms (NASDAQ:META) is on track to potentially achieve $25-26 per share in EPS next year, slightly above the consensus estimate. Factors such as a strong U.S. economy, lower inflation, favorable online ad pricing, and AI investments could fuel earnings growth. If Meta’s valuation aligns with the industry average P/E of 26.6x, shares could reach over $600.
Alger Spectra Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users. The company generates more than 95% of its revenue from advertising, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal second quarter operating results, with revenues and earnings beating analyst estimates. Management also raised their fiscal 2024 revenue guidance, citing improved advertising monetization. CEO Mark Zuckerberg stated that AI has played a key role in these successes, as the company is leveraging AI to enhance targeting, measurement, ranking, and ad delivery. Higher user engagement, driven by video ranking, content recommendations, and single video views, has also supported growth. Additionally, the optimization of ad placements within videos and automation of ad campaigns are further boosting monetization.”
