Meta Platforms: Up 400% in Two Years – A Closer Look at the Unstoppable Stock
Sunday, Nov 24, 2024 8:56 am ET
4min read Meta Platforms, Inc. (META), once known as Facebook, has been on an impressive run, with its stock price surging over 400% in the past two years. This remarkable growth has piqued investors' interest, raising the question: should you buy this unstoppable stock right now? To answer this, let's delve into the key drivers behind Meta's meteoric rise and examine the potential risks and challenges facing the company.
Meta Platforms' impressive stock performance can be attributed to several factors. Firstly, the company has reported strong financial results, with revenue and earnings per share (EPS) growing significantly. In the third quarter of 2024, Meta reported total revenue of $40.59 billion, a 19% increase year-over-year, and net income of $15.688 billion, a 35% increase year-over-year. Additionally, Meta Platforms' operating margin has improved to 43% from 40% in the same period last year.
Secondly, Meta Platforms' investment in artificial intelligence (AI) has paid off, with the company reporting 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.
Lastly, Meta Platforms' advancements in Reels and WhatsApp are helping manage capital expenditure (CapEx) growth, as the company strives to stay competitive in AI. Despite rising AI-related expenses, Meta's forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock within its peer group (Apple, Amazon, Microsoft, and Google), suggesting that the market views the company's AI investments as a strategic move.
However, investors should be aware of several potential risks and challenges facing Meta Platforms. The company faces regulatory scrutiny and potential fines or penalties, as seen with the FTC's $5 billion fine in 2019. Meta Platforms' reliance on advertising revenue makes it vulnerable to economic downturns and changes in advertising spend. Competition from other tech giants and startups in the social media and metaverse sectors could erode Meta Platforms' market share and user base. Geopolitical risks and regional regulatory challenges could also impact Meta Platforms' global operations.
To mitigate these risks, investors should diversify their portfolio to spread risk across multiple sectors and companies. They should monitor regulatory developments and Meta Platforms' response to potential challenges. Evaluating Meta Platforms' progress in diversifying its revenue streams and exploring new business models is crucial. Keeping an eye on the competitive landscape and Meta Platforms' innovation efforts is also essential. Staying informed about geopolitical risks and regional regulatory challenges that could impact the company's global operations is vital.
In conclusion, Meta Platforms' impressive stock performance over the past two years can be attributed to strong financial results, successful AI investments, and strategic advancements in its platforms. As Meta continues to invest in AI and manage CapEx growth, the company appears well-positioned for ongoing success. However, investors should be aware of the potential risks and challenges facing the company and take appropriate measures to mitigate them. With careful monitoring and adaptability, investors can benefit from the ongoing market growth and capitalize on the opportunities presented by Meta Platforms and other tech giants.
Meta Platforms' impressive stock performance can be attributed to several factors. Firstly, the company has reported strong financial results, with revenue and earnings per share (EPS) growing significantly. In the third quarter of 2024, Meta reported total revenue of $40.59 billion, a 19% increase year-over-year, and net income of $15.688 billion, a 35% increase year-over-year. Additionally, Meta Platforms' operating margin has improved to 43% from 40% in the same period last year.
Secondly, Meta Platforms' investment in artificial intelligence (AI) has paid off, with the company reporting 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.
Lastly, Meta Platforms' advancements in Reels and WhatsApp are helping manage capital expenditure (CapEx) growth, as the company strives to stay competitive in AI. Despite rising AI-related expenses, Meta's forward P/E ratio of 24x, based on FY 2025 EPS estimates of $24.62, makes it the second-most affordable big tech stock within its peer group (Apple, Amazon, Microsoft, and Google), suggesting that the market views the company's AI investments as a strategic move.
However, investors should be aware of several potential risks and challenges facing Meta Platforms. The company faces regulatory scrutiny and potential fines or penalties, as seen with the FTC's $5 billion fine in 2019. Meta Platforms' reliance on advertising revenue makes it vulnerable to economic downturns and changes in advertising spend. Competition from other tech giants and startups in the social media and metaverse sectors could erode Meta Platforms' market share and user base. Geopolitical risks and regional regulatory challenges could also impact Meta Platforms' global operations.
META Total Revenue YoY, Total Revenue
To mitigate these risks, investors should diversify their portfolio to spread risk across multiple sectors and companies. They should monitor regulatory developments and Meta Platforms' response to potential challenges. Evaluating Meta Platforms' progress in diversifying its revenue streams and exploring new business models is crucial. Keeping an eye on the competitive landscape and Meta Platforms' innovation efforts is also essential. Staying informed about geopolitical risks and regional regulatory challenges that could impact the company's global operations is vital.
In conclusion, Meta Platforms' impressive stock performance over the past two years can be attributed to strong financial results, successful AI investments, and strategic advancements in its platforms. As Meta continues to invest in AI and manage CapEx growth, the company appears well-positioned for ongoing success. However, investors should be aware of the potential risks and challenges facing the company and take appropriate measures to mitigate them. With careful monitoring and adaptability, investors can benefit from the ongoing market growth and capitalize on the opportunities presented by Meta Platforms and other tech giants.
