1. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 219
Talking about Meta, Cramer said:
“I would also buy Meta here. There’s all sorts of bogus scuttlebutt about how the President elect and Mark Zuckerberg don’t get along. I think that’s the old days people. I believe things have gotten better between the two, and you should think more about the fundamentals now, which are fabulous. Look, there is some common ground between the two. People were worried about the two of them being angry at each other. No.”
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.
Baron Opportunity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“Shares of Meta Platforms, Inc. (NASDAQ:META), the world’s largest social network, were up this quarter, due to impressive top-line growth of 22% year-over-year and solid forward guidance. Despite its large scale, Meta continues to outgrow the broader digital advertising industry, with better AI-driven content recommendations increasing engagement in products like Instagram Reels, and AI improving ad targeting and conversion rates. Our industry checks have continued to validate advertiser adoption and satisfaction, with improvements in Reels monetization, as well as strong adoption of Advantage+, Meta’s AI-driven service to allocate advertiser budgets across its content surfaces.
Meta continues to innovate in Gen AI, with a leading AI research lab and the best open-source models to date. We believe CEO Mark Zuckerberg’s open-source approach will encourage a broader developer ecosystem and standardization based on Meta, which will be beneficial for the company even if Meta doesn’t directly monetize model usage over the near term. In a blog this summer, titled “Open Source AI Is the Path Forward,” Zuckerberg laid out his case:…” (Click here to read the full text)
While we acknowledge the potential of Meta Platforms (NASDAQ:META), our conviction lies in the belief that under the radar 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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