3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors In Q1 2024: 246
Meta Platforms, Inc. (NASDAQ:META) is one of the largest social media and communications firms in the world. Its primary social media platform Facebook provides it with a stable revenue base due to a sizeable amount of users that are targetted through advertisements. At the same time, Meta Platforms, Inc. (NASDAQ:META) has made key moves in the AI industry through its Llama model and impressed developers by making Llama open source. To maintain its dominance, the firm has to regularly ensure that users remain engaged on Facebook and Instagram and do not migrate to other social media networks such as Elon Musk’s X (formerly Twitter). Meta Platforms, Inc. (NASDAQ:META)’s decision to buy hundreds of thousands of NVIDIA GPUs for AI training have also placed it in a key position in the AI industry since the GPUs are in short supply and those with access can gain advantages in developing new models. Should the firm succeed in commercializing Llama, then the future could be very bright for Meta Platforms, Inc. (NASDAQ:META).
Baron Funds is of the view that Meta Platforms, Inc. (NASDAQ:META) can maintain its key role in the industry due to its sizeable user base and key ties with advertisers. In its Q1 2024 investor letter, the fund outlined:
Shares of Meta Platforms, Inc., the world’s largest social network, rose 37.3% in the quarter due to robust fourth quarter top-line growth of 25% year-over-year with operating margins more than doubling year-over-year to 41%, benefiting from the year of efficiency12 as Meta’s headcount was down 22% year-over-year (note that the profitability of the core business is even stronger as Reality Labs’ losses of over $4.5 billion in the quarter are included in the overall operating income metric). Meta also guided for first- quarter revenue growth of approximately 29% year-over-year, which was better than expected. Advertiser satisfaction and adoption of Meta remains strong, core app engagement is healthy with video daily watch time up 25% year-over-year and the total number of monthly active users up 6% year-on-year to 3.98 billion in the fourth quarter, and Instagram Reels and click-to-message ads monetization continues to improve. Meta also continues to rapidly innovate in GenAI, with its leading research lab releasing widely adopted open-source models (e.g., Llama 2), and internal algorithms and core apps becoming augmented with AI (e.g., Meta’s recommendation engine). We remain shareholders and believe Meta can sustain its leading market share in digital advertising thanks to strong network effects enabled by its massive user and advertiser base. Additionally, we believe the company’s innovative culture, large installed base, and leading GenAI research should enable it to embed AI and GenAI into its offerings with further monetization opportunities ahead. For example, AI agents could help scale business messaging, handling a large volume of customer requests on behalf of business customers, making business messaging at scale more viable.
