2. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Funds Investors: 235
Steve Weiss, Founder and Managing Partner of Short Hills Capital Partners, explained in a latest program on CNBC why he’s buying more Meta Platforms Inc (NASDAQ:META) shares:
“I said this when the stock was trading at the highs—it was overvalued, and I knew it would correct because it just couldn’t maintain that valuation. That was euphoria on Trump’s win, which was obviously misplaced. So I was willing to suffer for it coming down, and I had trimmed. I had a super-sized position, and I had trimmed a little bit.
Now at this point, when you’re selling at a slight discount to the market despite having, I would say, not complete protection against the craziness and the chaos in DC but pretty good protection—except for, you know, the supply chain for the data centers, which they are largely having others build, which is a small number relative to the overall revenue—so I think that’s the time to step up when the multiple comes down.
Look, could it go lower? Absolutely. Could it go lower? You know, it could go lower. But to your point, you can’t market time—it’s impossible. So when I bought the stock, when I added to it yesterday, it was my final trade yesterday.”
Meta crushed expectations in the last quarterly results but yet again pointed to higher expenses in the future. In 2025, it sees total operating expenses in a range of $114-$119 billion, with 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly, but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. 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 substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on an investment, accounting for the timing and magnitude of cash flows over the holding period.
For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6 years holding period.
Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)
