We recently published a list of Jim Cramer Latest Portfolio Update: Top 10 Stocks. Since Meta Platforms Inc (NASDAQ:META) ranks 1st on the list, it deserves a deeper look.
Jim Cramer during his October 14 program on CNBC looked excited as he celebrated the rebound of major tech stocks, saying these companies are showing their “staying power” despite the odds.
“We’re back. That’s right. Whatever you want to call them, these big tech plays are demonstrating their staying power no matter what happens.”
Cramer said that the latest earnings season would be critical for the overall market and investor portfolios. He also pointed out the broadening of the rally, saying other groups besides the tech industry are also rebounding.
“This rally is not a zero-sum equation where the rest of the market does nothing. Other groups can work, too, in this market. There’s a lot of money going around, and we know there’s a lot of money coming into the market. The Fed is cutting rates, and friendly cash won’t be worth as much as it was. But the staying power of the Magnificent 7 is truly unbelievable.”
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 important stocks he’s talking about. With each company we have mentioned the number of hedge fund investors. 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).
Photo by Timothy Hales Bennett on Unsplash
Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 219
Jim Cramer in a latest program expressed his bullish views on Meta Platforms Inc (NASDAQ:META), saying the company is using AI to make effective advertising products. He said while his charitable trust took some profits on Meta, he continues to be bullish on the stock.
“His (Mark Zuckerberg) last conference call offered you a tale that said all ad campaigns will start on Instagram and Reels. Am I going to doubt this fella? No”
Meta Platforms Inc (NASDAQ:META) crushed past analyst estimates for its Q2 results, giving signs that the huge AI spending it’s doing would bear more results in the future.
The market has been reluctant about Meta Platforms Inc (NASDAQ:META) massive spending on AI. What does Meta want to achieve with its AI spending? The company wants to use AI to improve engagement and language models like Llama 3 to improve user interactions, boost engagement, and better monetize its 3.2 billion daily active users.
But can Meta Platforms Inc (NASDAQ:META) sustain this high spending? The company’s free cash flow margin is around 30%, and it’s well on track to report $50 billion in free cash flow this year. Based on this target the stock is trading at around 26 times this year’s free cash flow. Given the current trajectory continues Meta Platforms Inc (NASDAQ:META) can post $58 billion in free cash flow by next year, which means the stock is trading at 21 times next year’s free cash flow. With a whopping $35 billion in net cash, a strong user base, and a key position in the consumer-facing side of the AI industry, Meta Platforms Inc (NASDAQ:META) could be a solid long-term investment.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text)
Overall, Meta Platforms Inc (NASDAQ:META) ranks 1st on Insider Monkey’s list titled Jim Cramer Latest Portfolio Update: Top 10 Stocks. 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.
