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META Stock: Why Meta Platforms is an Investor’s Dream META Stock: Why Meta Platforms is an Investor’s Dream

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What an incredible journey Meta Platforms (NASDAQ:META) has had this year. The tech behemoth continues to shine bright in the eyes of tech investors, thanks to its formidable presence in artificial intelligence (AI). In 2024, META stock outdid itself by posting four stellar quarters, introducing its first-ever dividend, and amassing an outstanding $40.1 billion in sales, blowing past all expectations.

CEO Mark Zuckerbergโ€™s unwavering commitment to AI is palpable through Metaโ€™s Artemis AI chip development endeavors and recent strategic board additions like Broadcomโ€™s Hock E. Tan and John Arnold, all of which further bolster its AI dominance.

Over the past 12 months, Meta Platformsโ€™ stock has soared by a staggering 180%, cruising close to its all-time peak of around $500 per share at present. Investor sentiment has sky-rocketed as advertising has bounced back, fueled by expanded stock repurchase and dividend schemes. While Meta sports a colossal trillion-dollar market cap, it is still playing catch-up with Apple (NASDAQ:AAPL), whose iOS updates have had their fair share of impact on ad revenues.

Amidst the cutthroat competition, investing in META stock is like latching onto a comet. Here are three compelling reasons why META stock remains a tantalizing buy, even at these remarkable valuation levels.

Rock-Solid Financial Foundations and Future Prospects

The fourth quarter witnessed a staggering 203% surge in profits, surpassing prior upticks of 31% and 168%. Sales expansion also accelerated from 11% to 23% and 25%. Daily active users on Facebook hit 2.11 billion, marking a 6% year-over-year uptick. Furthermore, operational margins surged from 20% to 41% in the corresponding period of the previous year. Analysts are forecasting a whopping 52% earnings leap in 2024 and a subsequent 10% rise in 2025. The surge in institutional investments is evident, reflected in a robust B+ Accumulation/Distribution Rating.

Metaโ€™s stellar performance in 2023 surely instilled management with enough confidence to commence dividend payouts. Free cash flow experienced a commendable surge to nearly $44 billion, with cash and marketable securities standing strong at $65.4 billion, outpacing its $18.4 billion in debt. Revenue growth picked up pace with a remarkable 25% surge in the final quarter, juxtaposed against a 4% decline from a year prior.

Total revenue for 2023 surged by 16% while operating expenses saw a marginal 1% uptick, showcasing astute operational leverage. This disciplined operational approach fuelled considerable cash flow generation, positioning Meta as a prime candidate for dividend distributions alongside ongoing stock repurchases โ€“ a strategy already set in motion by the management team.

Firm Positioning in the AI and Tech Rat Race

In the wake of its makeover, Meta Platforms has emerged as a trailblazer in integrating AI into the metaverse, enriching immersive experiences with features like voice commands and bespoke AI chips.

Projections suggest that Meta may not surpass Apple in terms of valuation anytime soon, but it holds promising potential for growth at least in the short run. META stock would need to double to match Appleโ€™s market cap โ€“ a feat many attribute to the rising significance of AI. Despite Appleโ€™s modest single-digit profit growth and lofty valuation, it is undeniable that Meta presently appears comparatively pricey when weighed against its robust top and bottom-line growth metrics.

All eyes remain glued on the Meta Quest headset as a value-driven alternative to Appleโ€™s Vision Pro. Tapping into a partnership with LG Electronics, Meta aims to fortify its XR business, bolstering its foothold in the virtual and augmented reality realms. With ventures into AI-fuelled advertising, social media, and the metaverse, Meta stands poised for substantial expansion, justifying its current price-earnings multiple of 32.6.

Confidence of Analysts in METAโ€™s Strength

Breaking free from a three-week consolidation phase, Meta stock catapulted to a new peak surpassing $500 per share. This surge was attributed to fervent demand from both retail and institutional investors, prompting analysts to revise their price targets upwards.

The IBD Leaderboard stock hit a historic high on February 23, boasting a remarkable 38% year-to-date surge. Heading towards the $500 milestone, META stock has been riding high on its 10-week moving average, backed by robust relative strength. Adding to the optimism, BofA Securities raised Meta Platformsโ€™ price target from $405 to $425, citing prospective growth drivers like digital advertising and stellar market performance. These analysts currently maintain a buy rating on the stock.

Invest in and Hold META for the Long Haul

Iโ€™ve been a steadfast advocate for META stock for years, even through the tough times in previous bear markets. The companyโ€™s intrinsic value and its knack for venturing into future-based investments have been the core pillars of my faith. Meta boasts a management team that is tailor-made for the job, making it a compelling stock to own in the present scenario.

Undoubtedly, Meta may seem pricier now than it has in a while. However, my belief is that for investors seeking a growth gem to nurture over the coming decade or more, META stock is a shrewd pick at this juncture.

On the day of this publication, Chris MacDonald does not hold any positions in the securities discussed in this article, either directly or indirectly. The views expressed in this article are solely those of the author and are subject to the guidelines set by InvestorPlace.com.

Chris MacDonaldโ€™s passion for investing drove him to pursue an MBA in Finance and delve into various managerial roles in corporate finance and venture capital over the past 15 years. His history as a financial analyst coupled with his zest for uncovering undervalued growth prospects underpin his conservative, long-term investment approach.

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This article was first published on InvestorPlace.

The opinions expressed here are solely those of the author and do not necessarily reflect Nasdaq, Inc.โ€™s views.

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