We recently published a list of Stocks On the Rise: 8 Best Stocks to Invest in Now. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against other best rising stocks to invest In now.
The market experts believe that Q3 2024 saw stocks experience increased volatility, witnessing rapid declines and then rebounding. As per the US Bank, a significant Q3 2024 trend is the rotation away from the tech sectors. All the investors continue to ask the same question: Will the rally in mega-cap stocks continue? JP Morgan believes that their outperformance has been noteworthy for quite some time. The investment firm stated that, from a research perspective, the valuations of the biggest stocks appear historically expensive, not just in the US but throughout the developed markets. Therefore, the investment firm’s expected return signals now favour the smaller market cap cohorts.
That being said, fundamentals for mega-cap stocks remain outstanding. Such giants have much higher profitability, lower debt, and improved earnings momentum. The bank believes that for investors who are worried about a slowdown, pivoting to mid/small caps remains difficult. On the other hand, investors seeing AI enthusiasm entering the speculative phase will find it easier to liquidate the winners. Therefore, the firm believes that the case for building mid/small cap exposure remains reasonable but not compelling.
Goldman Sachs increased its year-end target for the S&P 500 and expects more gains for the benchmark in 2025. These gains stem from the stocks, which continue to increase on the back of strong economic growth, lower Federal Reserve interest rates, and expansion of corporate earnings. The US stocks are expected to be aided by numerous tailwinds in the final months of the year, after the Fed’s pivot to rate cuts and the new fiscal stimulus from China. Both these measures improved the risk sentiments. Market experts believe that stocks should see support from the Q3 earnings season and expansion of corporate profits in the final 3 months as the economy continues to surpass expectations.
LSEG data demonstrates that collective S&P 500 earnings for Q3 2024 should grow 5% as compared to the previous year to ~$5.11 billion. This reflects a decline from the earlier projections of a $5.19 billion tally. Nonetheless, it still indicates strong momentum for this year and next, with Q4 profits anticipated to increase by ~12.5%.
Recently, Goldman trimmed its 2024 earnings growth forecast to 8.2% from 8.4%. However, the investment firm expects that earnings momentum will continue to build in the next year. The firm increased its profit growth projection by 5 percentage points to 11%. This upward revision to its 2025 EPS estimate revolves around increased margin expansion. The firm added that the broader macroeconomic backdrop is conducive to slight margin expansion.
Moreover, the firm increased its year-end S&P 500 target to 6,000 points, exhibiting a rise from the prior forecast of 5,600. The investment firm expects a P/E multiple of ~22x for the S&P 500, which remains in line with the company’s macro model of fair value. This will largely remain unchanged over the upcoming 3 months. For 2025, the bank expects the S&P 500 to increase by another ~300 points, to reach the year-end target of 6,300.
Market strategists believe that the momentum in the broader equities is likely to be aided by a blowout September 2024 jobs report, the start of the US Fed’s rate-cutting cycle, and China’s economic stimulus.
Our methodology
To make a list of 8 Best Stocks to Invest in Now, we used stock screeners to find quality stocks that have gained at least 30% on a YTD basis, as of October 7. We also made sure that these stocks were popular among elite hedge funds. The stocks have been arranged in ascending order of their hedge fund sentiment, as of Q2 2024.
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).
A team of developers working in unison to create the company’s messaging application.
Meta Platforms, Inc. (NASDAQ:META)
% Gain on a YTD Basis: ~70%
Number of Hedge Fund Holders: 219
Given Meta Platforms, Inc. (NASDAQ:META)’s network effects regarding the massive user base, and its intangible assets consisting of a collection of data users have shared on the company’s sites and apps, it is well-positioned to sustain its growth trajectory. The company’s capability to profitably monetize its network via advertising should help it generate excess returns on capital for the foreseeable future. Meta Platforms, Inc. (NASDAQ:META)’s AI-powered products, such as Ray-Ban Meta Glasses and Quest 3 headset, continue to see healthy demand, exceeding the anticipations. Wall Street believes that its partnership with EssilorLuxottica should drive future generations of AI glasses.
Meta Platforms, Inc. (NASDAQ:META) continues to focus on AI to enhance user experiences and drive engagement. Also, it has plans to develop a unified recommendation system and AI-generated creative for advertisers. It plans to scale Gen AI training capacity and build infrastructure for directing training capacity. Overall, investments in the metaverse, AI, and digital advertising should act as tailwinds.
Meta Platforms, Inc. (NASDAQ:META) focuses on improving the shopping experience on platforms and monetizing assets such as Marketplace. It has been building out capacity for AI training and is considering expected use cases for data centers. Given its solid financial foundation and a strong focus on innovation, the company is well-placed to remain at the forefront of the tech sector.
Cantor Fitzgerald reiterated an “Overweight” rating on the shares of Meta Platforms, Inc. (NASDAQ:META), setting a $660.00 target price on 7th October. Rowan Street Capital released its second-quarter 2024 investor letter. Here is what the fund said:
“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 ranks 1st on our list of Best Stocks to Invest in Now. While we acknowledge the potential of META as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
