5 Best High Margin Growth Stocks to Buy Now

2. Meta Platforms, Inc. (NASDAQ:META)

Operating Margin: 33.40%

Number of Hedge Fund Holders: 184

Meta Platforms, Inc. (NASDAQ:META) dominates the social media industry, owning Facebook, WhatsApp, Instagram, and Facebook Messenger, some of the most widely used social media applications across the globe. The company’s strong position and market share in the industry allow it to maintain its profit margins. Moreover, the stock is currently trading at bargain levels, making now an attractive time to buy it. As of August 24, Meta Platforms, Inc. (NASDAQ:META) is trading at a P/E ratio of 14.1x and has free cash flow of $35.8 billion. The company has a trailing twelve-month operating margin of 33.40%.

On July 28, RBC Capital analyst Brad Erickson revised his price target on Meta Platforms, Inc. (NASDAQ:META) to $190 from $200 and reiterated an ‘Outperform’ rating on the shares.

At the end of Q2, 184 hedge funds held stakes in Meta Platforms, Inc. (NASDAQ:META) worth $18.2 billion, compared to 200 positions in the previous quarter with stakes worth $19.3 billion. Fisher Asset Management raised its stake in Meta Platforms, Inc. (NASDAQ:META) by 4% in Q2, giving it a holding valued at $1.86 billion. As of June 30, Fisher Asset Management owns over 11.5 million shares of Meta Platforms, Inc. (NASDAQ:META), making it the most prominent investor in the company.

Here is what Rowan Street Capital had to say about Meta Platforms, Inc. (NASDAQ:META) in its first-half 2022 investor letter:

“Now, there are valid concerns around Meta Platforms, Inc. (NASDAQ:META) business like competition from TikTok, Apple privacy update on iOS (reduced effectiveness of targeted ads), and heavy capital investments in the Metaverse (Reality Labs Division).

Meta’s revenue growth slowed to just 7% in recent quarter, and it ramped up its spending at the same time on new short videos for Facebook and Instagram, which could eventually widen its moat against TikTok; and its unprofitable Reality Labs segment, which produces its virtual reality (VR) and augmented reality (AR) devices. The combination of slowing sales and rising expenses spooked investors, and the bears were convinced that Meta’s high-growth days are over.

Combine that with the mounting macro concerns and a huge sell-off in growth stocks and we have Meta currently trading like a cyclical energy stock selling at just 14x this year’s earnings and 12x 2023 estimated earnings. In 2021, they generated $13.68 in free cash flow per share, which translates to ~10% free cash flow yield based on trailing numbers (obviously their cash flow can decline). On a price-to-sales basis, stock trading at just 3.6x (see below) — all-time low…” (Click here to read more)