Meta Platforms’ Strong Performance Amidst Competitive Landscape
Meta Platforms META has seen its shares rise by 66.5% this year, outperforming the broader Zacks Computer & Technology sector, which returned 30.4%, and the Zacks Internet Software industry, which rose by 30%. However, it trailed behind only NVIDIA NVDA within the “Magnificent 7” group, which includes top tech names like Alphabet GOOGL, Amazon, Microsoft MSFT, Apple, and Tesla.
In terms of year-to-date performance, NVIDIA leads with a staggering 198.1%, followed by Amazon at 37%, Tesla at 29.3%, Alphabet at 27.7%, Apple at 17.9%, and Microsoft at 12.4%.
One major factor driving Meta’s performance is its commitment to artificial intelligence (AI), which has enhanced user engagement. Recent updates, like a unified video player and improved AI recommendations, led to an 8% increase in time spent on Facebook and a 6% increase on Instagram.
META’s Year-to-Date Success
Image Source: Zacks Investment Research
AI is also pivotal for Meta in retaining advertisers. Tools like generative AI-based image expansion and text generation have resulted in an estimated 7% increase in conversions for businesses utilizing these features.
In terms of financials, Meta Platforms saw advertising revenues—a major contributor at 98.9% of Family of Apps revenues—jump 18.6% year-over-year to $39.89 billion. This revenue constituted 98.3% of total revenues for the third quarter of 2024. When adjusted for constant currency, the revenue rose by 23% year-over-year.
META Leverages Data to Elevate AI Capabilities
Meta’s massive user base of over 3.2 billion daily users provides it with a substantial data advantage, crucial for training its AI models. This has enabled improvements across its platforms—WhatsApp, Instagram, Messenger, and Facebook, solidifying its place in the digital advertising arena alongside Alphabet.
Furthermore, Meta is targeting younger users by enhancing Facebook’s features. New additions aim to keep 18-29 year-olds engaged through expanded content discovery beyond close friends. Safety measures, like the introduction of Teen Accounts to limit messaging and visible content, have also been implemented.
Meta has rolled out “Matchmaker,” a feature in Facebook Dating that allows users to involve friends in finding matches—and the Threads app now has over 275 million active monthly users, seen as a potential major social platform moving forward.
Recently, Meta started to deploy Meta AI, aspiring to be the most popular AI assistant by the end of the year. Currently, Meta AI boasts over 500 monthly active users.
The introduction of the Llama family of foundational models has significantly impacted Meta’s operations. Usage of the Llama tokens has surged in 2024, and the anticipated Llama 4 models are expected to offer enhanced functionalities and faster performance compared to their predecessors.
Notably, the Llama technology is set to become available in U.S. government agencies through partnerships with leading firms like Accenture, Amazon, and Microsoft, promising further adoption and growth.
META’s Forecast Adjustment Signals Growth Potential
For the fourth quarter of 2024, Meta projects total revenues between $45 billion and $48 billion, with no significant foreign exchange impact anticipated on year-over-year growth.
The Zacks Consensus Estimate for earnings per share in the fourth quarter has risen by 7.02% over the past month to $6.70, marking a 25.7% increase compared to the previous year. The forecast for fourth-quarter revenues is $47.03 billion, indicating a 17.24% year-over-year rise.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
The consensus estimate for earnings in 2024 stands at $22.53 per share, a 5.4% upward revision in 30 days, implying a noteworthy 51.51% increase over 2023. Additionally, the expected revenues for 2024 are pegged at $162.97 billion, reflecting a 20.81% year-over-year growth.
META Stock’s Valuation Raises Some Concerns
Despite its growth prospects, META stock is trading at a premium. The Value Score indicates a C rating, suggesting that its valuation might be stretched at this time.
Currently, META trades at a forward 12-month Price/Sales ratio of 8.11X, above its historical median of 7.47X and the sector average of 6.39X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
Driven by its expanding influence among young users and enhanced AI capabilities, META is poised for substantial growth. As a result, it is gaining traction among advertisers, likely propelling its revenues forward.
Currently holding a Zacks Rank #2 (Buy) and a Growth Score of A, META presents a compelling investment case. Investors can find a complete list of Zacks’ #1 Ranked (Strong Buy) stocks available today.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
