2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 262
Doug Clinton, Co-Founder and Partner at Deep Water Asset Management, said in a latest program on CNBC that Mark Zuckerberg is perhaps the strongest CEO among the Mag. 7 companies.
“If you put it all together, Zuckerberg might be the strongest CEO of the Mag 7, and I know that might be a controversial statement. That might say a lot when your competition is Jensen Huang and Elon Musk. But you look at what Zucker has, right? He’s young, he’s only 40 years old, he’s going to be at the helm for a while. Now, he’s been very decisive. I think that they’ve made changes in terms of how they’ve pushed urgency at the company. And then on top of all that, he’s only focused on one company, unlike Elon Musk, who is doing so many things, and many of them quite well. But Mark Zuckerberg’s focused on just Meta. I think you put all those things together, it’s great for the company. And I think you have to think about the multiple, right? When you have a young CEO who will be around, and I think for years on end, it’s good for duration for the business, and it should be good for the multiple.”
Meta crushed expectations with the latest quarterly results but yet again pointed to higher expenses in the future. In 2025, it sees total operating expenses in a range of $114-$119 billion, with 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. 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 substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on an investment, accounting for the timing and magnitude of cash flows over the holding period.
For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6 years holding period.
Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)
