3. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 242
Meta Platforms Inc (NASDAQ:META) is fast becoming one of the top AI stocks. Meta Platforms Inc (NASDAQ:META) doesn’t make AI chips, nor does it produce any AI software kit like AWS. Then what makes Meta Platforms Inc (NASDAQ:META) an AI play? Meta Platforms Inc (NASDAQ:META) bulls believe the stock is an AI consumption and user adaption play. Meta Platforms Inc (NASDAQ:META) is using AI algorithms to drive engagement across its platforms like Instagram and Facebook. In the first quarter Meta Platforms Inc’s (NASDAQ:META) reported a 27.6% YoY revenue growth to $36.5 billion. Compare to this to just 2.5% growth in revenue reported in the same quarter last year and you get to know the size of AI opportunity Meta Platforms Inc (NASDAQ:META) is just beginning to enjoy.
Meta Platforms Inc (NASDAQ:META) shares, however, recently fell after the company said its capital expenses will rise amid AI-related growth initiatives. In 2024, it expects total expense to come in between $96 billion and $99 billion, up from its earlier forecasts of $94 billion to $99 billion. But long-term analysts believe these investments will pay off in the long run.
Meta Platforms Inc (NASDAQ:META) talked about its AI plans in its latest earnings call:
We’re also introducing deeper integrations of Generative AI into our apps in the US and more than a dozen other countries.
“Along with using Meta AI within our chat surfaces, people will now be able to use Meta AI in search within our apps as well as feed and groups on Facebook. We expect these integrations will complement our social discovery strategy as our recommendation systems help people to discover and explore their interests while Meta AI enables them to dive deeper on topics they’re interested in. Threads also continues to see good traction as we continue to ship valuable features and scale the community. Now to the second driver of our revenue performance, increasing monetization efficiency. There are two parts to this work. The first is optimizing the level of ads within organic engagement. Here we continue to advance our understanding of users’ preferences for viewing ads to more effectively optimize the right time, place and person to show an ad to.
For example, we are getting better at adjusting the placement and number of ads in real time based on our perception of a user’s interest in ad content and to minimize disruption from ads as well as innovating on new and creative ad formats. We expect to continue that work going forward while surfaces with relatively lower levels of monetization like video and messaging will serve as additional growth opportunities. The second part of improving monetization efficiency is enhancing marketing performance. Similar to our work with organic recommendations, AI is playing an increasing role in these efforts.”
Read the full earnings call transcript here
Jim Cramer has been turning bullish on the stock. Earlier this year Cramer cautioned investors to ignore Meta Platforms Inc (NASDAQ:META) at your own risk. Last week, he said:
“When we get those pullbacks like we had the other day, yes, you wanna buy Google, you wanna buy Amazon, you wanna buy Meta, even.”
Patient Capital Opportunity Equity Strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its first quarter 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) was a top contributor in the first quarter gaining another 37.5%. Performance has been supported by strong top and bottom-line growth as the company maintains its leadership in the advertising space, despite Reels still being under monetized versus Newsfeed and Stories. The company continues to return cash to shareholders, increasing their buyback program by another $50B in February (6.4% of shares outstanding), and announcing their first dividend of $0.50 per share (0.39% yield). The company trades at 25x this year’s earnings, which we do not view as too demanding for a company with some of the best AI assets, an improving topline that should lead to free cash flow outperformance and continued capital return.”
