We recently published a list of Jim Cramer is Talking About 10 Falling Stocks Amid Latest Market Rotation. Since Meta Platforms Inc (NASDAQ:META) ranks 3rd on the list, it deserves a deeper look.
Jim Cramer in a program last week tried to make sense of the decline in tech stocks, saying companies with the “best fundamentals” got “hammered once again.”
“I did not expect that to happen.”
Cramer said that sometimes it’s difficult to own the “winners.” The CNBC host said it’s important to understand the bear cases around stocks otherwise you will never know what “you are up against.”
Jim Cramer tried to find out whether the latest decline in top tech stocks was just a “periodic selloff” that presented an “opportunity.”
“When we get this kind of rotation, you never know whether these stocks are selling off because there’s something wrong or because they are up huge.”
Jim Cramer pointed to a caveat when it comes to holding winning stocks. When you have the losers, there are no profits, but when you own winners in your portfolio, you can see losses because people want to take some profits off the table, Cramer said.
The CNBC host said when top stocks go down, people holding those in their portfolios often end up thinking about whether they should also sell these stocks and if something has “changed.”
“From what I can tell you, nothing has changed about the stocks we are going talk about tonight. But it is true that the stocks are a heck of a lot more expensive than they were one year ago.”
In this program, we took a look at some top tech stocks that fell last week and explained the reasons they lost value according to Jim Cramer. We also discussed these companies’ fundamentals and hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 246
Jim Cramer in a latest program said Meta Platforms Inc (NASDAQ:META) seemed “solid” but it’s a “little unnerving” for people to own a stock that is not much liked by the front runner in the presidential race.
“Even though Trump is rabidly anti-China, he’s willing to support Tik Tok, a Chinese company, as a counter-balance to Mark Zuckerberg.”
Cramer was referring to Trump’s recent statement where he said he’s “for TikTok.”
Jefferies analyst Brent Thill chose Meta Platforms Inc (NASDAQ:META) as one of his top AI picks in the consumer AI space.
The social media giant is using AI to optimize ad targeting and recommendation systems to boost engagement and ads revenue. In the first quarter, Meta Platforms Inc’s (NASDAQ:META) revenue jumped 27% to $36.5 billion. A whopping 97% of this revenue came courtesy of ads. In 2024, Meta Platforms Inc’s (NASDAQ:META) ads revenue is expected to rise by 17%. Reels, which is posting solid numbers and engagement lately, saw a 20% ad load in the first quarter, compared with 16.2% in the same quarter last year. Meta Platforms Inc (NASDAQ:META) recently posted speculator Q1 results but the stock slipped after the company revealed that Meta Platforms Inc’s (NASDAQ:META) CapEx will come in the range of $35 billion to $40 billion, higher than the previous forecast of $30 billion to $37 billion. However, long-term analysts believe since most of this spending will go into AI projects, it’ll bode well for the stock down the road.
Based on its 2025 EPS estimate of $23.11 set by Wall Street, Meta Platforms Inc. (NASDAQ:META) is trading at a forward P/E of 21, which makes the stock attractively valued given Meta’s earnings are expected to grow 14.50% next year and by 30% over the next five years on a per-annum basis.
Alger Focus Equity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising. which accounts for over 95% of its total revenue, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than- expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
Overall, Meta Platforms Inc (NASDAQ:META) ranks 3rd on Insider Monkey’s list titled Jim Cramer is Talking About 10 Falling Stocks Amid Latest Market Rotation. While we acknowledge the potential of Meta Platforms Inc (NASDAQ:META), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
