Can This Unstoppable Stock Double in 5 Years?
Sunday, Jan 19, 2025 10:04 am ET
3min read Meta Platforms (META) has been a standout performer in recent years, with shares surging 178% since January 2020. The company's impressive track record and strong competitive position have investors wondering if this "Magnificent Seven" stock can double in the next five years. Let's dive into the factors that support Meta's potential for significant stock price appreciation.
Meta's bullish qualities are evident in its economic moat, profitability, and growth prospects. The company's insanely powerful network effects, economies of scale, data and AI, brand recognition, and investment in infrastructure create a strong competitive position that is difficult to challenge. With 3.29 billion daily active users across its social media apps, Meta's network effects continue to strengthen as more people use its platforms, making it nearly impossible for new competitors to dethrone the company's industry position.
Meta's profitability is another key factor supporting its potential for significant stock price appreciation. The company's operating margin increased from 25% in 2022 to 43% in the third quarter of 2024, demonstrating its ability to scale efficiently and generate robust free cash flow. Meta's adjusted net income declined 9% over the year-ago quarter, but investors can expect the business to improve this performance over the next few years as management focuses on improving efficiency and downsizing non-core assets.
Meta's healthy growth outlook is another reason to be optimistic about the company's stock price appreciation. Despite trailing-12-month revenue of $156 billion, analysts expect sales and earnings per share to increase at an annualized rate of 13.7% and 12.9% between 2024 and 2026, respectively. This growth trajectory is supported by the company's strong position in the worldwide digital ad market and its ability to serve up more ad impressions at higher average prices per ad.
Meta's strategic capital expenditures, particularly in AI infrastructure, also play a crucial role in the company's growth prospects. The company plans to have significant capital expenditures growth in 2025, compared to $37 billion to $40 billion last year. This increased investment is focused on boosting the company's network infrastructure to support its artificial intelligence ambitions, positioning Meta at the forefront of the next game-changing technology.
In conclusion, Meta Platforms' strong competitive position, profitability, and growth prospects support the company's potential for significant stock price appreciation in the coming years. With a reasonable forward price-to-earnings ratio of 24.2 and a projected earnings growth rate of 12.9% between 2024 and 2026, investors have a good chance of doubling their money in Meta's stock over the next five years. As always, it's essential to conduct thorough research and consider your risk tolerance before making any investment decisions.
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