It wasn’t too long ago when Meta Platforms (NASDAQ:META) stock was trading at just $90 per share in 2022. That marked the lowest level for the stock in more than a decade. That year also marked a turnaround for the company, with CEO Mark Zuckerberg calling it the “Year of Efficiency.” What this really meant was multiple rounds of layoffs and cost-cutting, as well as pulling back on spending for the Reality Labs segment.
Since then, it’s been all uphill for META stock. In recent weeks, the stock hit an all-time high price of $543 per share. Meta has implemented a quarterly dividend and is currently the seventh-largest company in the world by market cap.
Although the natural inclination would be to expect a correction for the stock, I believe there is still room to rise for Meta.
Could AI Be Bigger for Meta Than Social Media?
The AI industry is still in its early stages, but Meta has already established itself as a major player. Unlike OpenAI and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Meta has created its Llama-3 large language model to be open sourced and free to developers and users. Some reviews have Llama-3 already providing comparable performance to OpenAI’s GPT-4.
In addition to Llama-3, Meta has integrated its Meta AI into its leading platforms like Facebook, Instagram and WhatsApp. Meta uses this AI to learn user preferences and habits and provide content recommendations via Instagram Reels or user-focused advertising. The targeted approach has kept users engaged on the application and reduced the cost-per-click for advertisers by 28%.
One issue with Meta’s AI is that during last quarter’s earnings call, the company mentioned it could be years before it is properly monetized. This was one of the leading factors in the stock dropping by 10% the following session. The stock’s quick recovery is a testament to what I believe is plenty of untapped value in Meta’s share price. Over the long run, I believe Meta’s investment in AI will pay dividends for the company and its shareholders.
Meta’s Fundamentals and Valuation Are Solid
After gaining more than 33% in 2024, one would assume that Meta’s valuation has inflated to a point where it is overpriced. This is not the case as Meta has one of the lowest multiples among the Magnficent 7 group of stocks. Shares of Meta trade at 24.7x forward earnings, which is much lower than the likes of Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL).
| Stock Symbol | Forward P/E | Price-to-Sales |
| Meta Platforms | 24.7x | 9.0x |
| Microsoft | 33.2x | 14.0x |
| NVIDIA | 46.7x | 38.3x |
| Apple | 30.4x | 9.2x |
| Tesla (NASDAQ:TSLA) | 99.0x | 9.0x |
| Amazon (NASDAQ:AMZN) | 39.8x | 3.3x |
| Alphabet | 24.1x | 6.9x |
Meta’s fundamentals are also solid. It has enough cash flow to implement its quarterly dividend earlier this year. The company also approved a $50 billion share buyback plan, providing shareholders with plenty of value for owning the stock.
Meta Stock is a Buy For the Second Half of 2024
Considering that Meta’s earnings call is next week, I can’t help but rate the stock a “buy” for the year’s second half. Meta’s stock checks all of the boxes for me and it’s easy to see why it is a market-leading general.
Meta’s social media dominance is a strong moat to have. With over 3.24 billion daily active people across its apps, nearly half the world uses Meta’s products daily. On top of this, Meta’s development in the AI field could provide an even larger revenue stream in the future.
Meta trades at a low multiple compared to its big-tech peers and has enough cash flow to sustain a dividend and share buyback plan. Considering all of this, Meta is one stock that is at the top of my buy list.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held LONG positions in AAPL and NVDA.
