Meta Platforms(NASDAQ: META) stock has seen significant recovery over the past two years, rising by over 400%. The company shifted its focus from the metaverse to artificial intelligence (AI), helping it to reshape its financial landscape dramatically.
Despite Meta’s impressive surge, with its market capitalization crossing $1.5 trillion, investors may question the sustainability of this growth, particularly if revenue begins to slow. Weighing the future of Meta’s stock is essential for those deciding whether to maintain their investment or distance themselves from this social media giant.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
Overview of Meta Platforms
Meta is renowned for its stronghold on the social media market, with nearly 3.3 billion people using its platforms daily. The company’s advertising revenue ranks second only to Alphabet, Google’s parent company, in the public sector.
Meta’s standout position faces competition primarily from TikTok. Speculation about a potential TikTok ban in the U.S. has led investors to consider Meta as a beneficiary of any ad revenue that TikTok might lose.
However, the TikTok scenario remains unpredictable. The platform’s owner, ByteDance, might comply with U.S. demands and sell TikTok to an American company before the Jan. 19 deadline. Additionally, the U.S. Supreme Court is set to review a case regarding the TikTok ban, which could negatively impact Meta’s stock if the ruling favors TikTok.
Fortunately, Meta’s investments in AI could represent a stable revenue stream independent of TikTok’s influence. Despite past challenges linked to its Reality Labs metaverse division, Meta’s focus on AI has sparked revival for its business operations.
Financial Implications of Meta’s Business Strategy
To support its AI initiatives, Meta plans to allocate between $38 billion and $40 billion for capital expenses. Despite the hefty investment, the company is well-positioned financially, having generated $156 billion in revenue over the past year, emphasizing its advertising strength.
Additionally, with about $71 billion in liquid assets and $52 billion in free cash flow over the last year, Meta has ample funds to support both its investments and cover its $5 billion annual dividend costs. Furthermore, Meta’s stock remains reasonably valued, with a P/E ratio of 28, below the S&P 500 average of 31.
Nevertheless, potential challenges await. Analysts project a 21% revenue growth for 2024, expected to taper to 15% in 2025. Historically, investors tend to react negatively to signs of slowing revenue, which may dampen gains heading into the new year.
Is It Time to Reevaluate Meta Platforms Stock?
Given Meta’s dominance in social media, robust advertising revenue, and evolving AI capabilities, investors may want to maintain their stake in Meta and potentially explore new shares.
However, uncertainties related to TikTok and concerns about anticipated slowing revenue growth might impact stock performance in the short term. Moreover, the stock’s recent upward trend suggests that much of the company’s positive potential may already be reflected in its market value.
Nonetheless, Meta’s diverse range of applications should help retain user engagement. Additionally, as its AI capabilities expand, the company is likely to continue producing substantial free cash flow, benefiting shareholders and promoting long-term growth.
Should You Invest $1,000 in Meta Platforms Today?
Before making an investment in Meta Platforms, consider the following:
The Motley Fool Stock Advisor analyst team has identified the 10 best stocks to buy right now, and Meta Platforms is not one of them. The recommended stocks have the potential to yield significant returns in the future.
For example, if Nvidia was on the list back on April 15, 2005, an investment of $1,000 at that time would be worth $842,611 today!*
Stock Advisor provides investors with straightforward strategies for success, including guidance on building a portfolio, regular analyst updates, and two new stock picks each month. The service has more than quadrupled the returns of the S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of December 30, 2024
Randi Zuckerberg, former market development director and spokesperson for Facebook, and sister of CEO Mark Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is also on the board. Will Healy holds no positions in any of the mentioned stocks. The Motley Fool recommends both Alphabet and Meta Platforms and has a disclosure policy in place.
The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
