We came across a bullish thesis on Meta Platforms, Inc. (META) on Investment Ideas by Antonio’s Substack by Antonio Linares. In this article, we will summarize the bulls’ thesis on META. Meta Platforms, Inc.’s share was trading at $582.01 as of Oct 22nd. META’s trailing and forward P/E were 29.42 and 23.87 respectively according to Yahoo Finance.
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Meta’s Q2 2024 earnings report indicates that we are not in an AI bubble, with the company’s stock soared 415% since Nov 22. Meta’s current business model revolves around enhancing engagement across its Family of Apps, demonstrating the effectiveness of artificial intelligence in driving user interaction. A notable shift occurred with an 8-10% increase in Reels watch time after Meta implemented a unified AI recommendation model for all video players, a move that showcases AI’s role in boosting incremental engagement across the platform.
Meta’s strategic investments in data center infrastructure over the past five years allow the company to capitalize on high-return opportunities, proving its ability to innovate and adapt quickly to market demands. Meta is also distinguishing between core AI and generative AI, noting that while the latter may not deliver immediate returns, investments in core AI are already yielding strong results. CFO Susan Li emphasized that ongoing investments in core AI enhance content recommendation and advertising relevance, ensuring that Meta can direct its resources flexibly across various AI initiatives as opportunities arise.
Concerns about Meta’s decision to open-source the Llama model stem from misunderstandings about value creation in networked environments. The true value lies not in the models themselves, but in their application within Meta’s expansive user base. Furthermore, the Threads platform has surpassed 200 million monthly active users, positioning Meta to leverage economies of scale before monetizing the service fully.
Despite initial skepticism about its metaverse ambitions, Meta is proving to be a formidable player in AI-driven technologies. The Reality Labs segment, which includes revenue from Quest headset sales, has also shown a 28% year-over-year increase, signaling growth potential that could contribute to a new computing platform. Meta’s ability to iterate quickly and focus on customer needs has been critical to its success. As Zuckerberg noted, the company is committed to learning faster than competitors, positioning it to thrive in a dynamic market landscape.
Meta’s bullish outlook is fueled by its strategic focus on AI and infrastructure, which positions the company for significant growth. By integrating its AI model across its apps, Meta has achieved an 8-10% increase in Reels watch time, boosting user engagement and monetization. The introduction of a fractal AI architecture offers customized solutions for businesses and creators, enhancing Meta’s value. With successful launches like Threads, which gained over 200 million users, Meta is diversifying into AI solutions, ready to seize market opportunities for long-term growth.
Meta Platforms, Inc. is on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 219 hedge fund portfolios held META at the end of the second quarter which was 246 in the previous quarter. While we acknowledge the risk and potential of META as an investment, our conviction lies in the belief that some 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 CL 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 was originally published at Insider Monkey.