3. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) is arguably the most promising growth stock, according to hedge funds, for diversifying an investment portfolio in the social media space. As the top social media company, Meta has cemented its position in the lucrative advertising business. It also leverages artificial intelligence to strengthen its competitive edge and enhance user experience.
As of June, Meta Platforms, Inc. (NASDAQ:META) commanded over 3.3 billion active users across its suite of applications, Facebook, Instagram, WhatsApp, Messenger, and Threads. The massive target market has made Meta the go-to for advertising campaigns, allowing the company to strengthen its advertising empire.
Meta Platforms, Inc. (NASDAQ:META) stands out in advertising services as it enables advertisers to reach specific audiences by considering their age, interests, and geographical location. This highly effective business strategy propelled Meta’s stock to unprecedented levels.
During the second quarter of 2024, Meta’s advertising division brought in $38.3 billion in revenue, marking a 22% increase from the previous year. This figure represented 98% of Meta’s total income, indicating its significant influence on its strategic direction.
Growth has been excellent, propelled by the ongoing trend of digital advertising. Over the last ten years, Meta has achieved a yearly revenue increase of 29.7%. Considering that the worldwide digital ad market is expected to rise to more than $1 trillion by 2030, Meta still has a strong opportunity for further growth.
Meta Platforms, Inc. (NASDAQ:META)’s economic moat is solid as it boasts a return on invested capital (ROIC) of 31%, threefold the mean ROIC of the S&P 500. This indicator shows Meta’s remarkable skill in producing sufficient profits from its reinvested capital. Without this barrier, the ROIC number would be significantly reduced. Likewise, the stocks command an average buy rating on Wall Street with a $611.20 price target, implying a 4.32% upside potential.
By the end of the second quarter, Meta Platforms, Inc. (NASDAQ:META) appeared in the portfolios of 219 hedge funds, with a combined stake value of $42.5 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.”
