3. Meta Platforms, Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Dan Niles, Niles Investment Management founder and portfolio manager, discussed Meta earnings in a program on CNBC and said the stock remains among his favorites for the rest of this year.
“Meta came out, had solid results, but they always guide conservatively in the September quarter for the outlook, and the stock sold off, which is what we expected it to do.”
Despite posting strong quarterly results, Meta Platforms (NASDAQ:META) shares fell as rising AI-related expenses yet again spooked investors about ROI. However, Meta platforms (NASDAQ:META) bulls believe Zuckerberg’s plan to keep spending on AI is totally justified.
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta also reported strong adoption of its Llama AI model, attracting over 500 million monthly active users across its platforms. This progress positions Meta well for robust profitability in the next two years as it scales its AI infrastructure.
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 clear monetization strategy for its generative AI, especially with Llama3, makes it a strong contender against rivals like OpenAI’s ChatGPT. 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. Although short-term investors may be concerned about Meta Platforms (NASDAQ:META)’s increased AI spending, its forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock, after Google, within its peer group (Apple, Amazon, Microsoft, and Google).
According to some estimates, Meta Platforms (NASDAQ:META) is on track to potentially achieve $25-26 per share in EPS next year, slightly above the consensus estimate. Factors such as a strong U.S. economy, lower inflation, favorable online ad pricing, and AI investments could fuel earnings growth. If Meta’s valuation aligns with the industry average P/E of 26.6x, shares could reach over $600.
Alger Spectra Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users. The company generates more than 95% of its revenue from advertising, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal second quarter operating results, with revenues and earnings beating analyst estimates. Management also raised their fiscal 2024 revenue guidance, citing improved advertising monetization. CEO Mark Zuckerberg stated that AI has played a key role in these successes, as the company is leveraging AI to enhance targeting, measurement, ranking, and ad delivery. Higher user engagement, driven by video ranking, content recommendations, and single video views, has also supported growth. Additionally, the optimization of ad placements within videos and automation of ad campaigns are further boosting monetization.”
