Meta Platforms (NASDAQ:META) is a solid buy. This rating is based on its focus on open-source artificial intelligence and AI integration. The company made sharp advancements in AI tech, supported by the Meta AI assistant and the Llama 3 model. These efforts boost user engagement and derive top-line growth through better ad targeting and new monetization strategies.
Moreover, Meta has a solid user base, which indicates its solid engagement and market penetration. The user base comprises over 3.2 billion daily active users. Meta intends to significantly increase its energy and capital expenditures to develop AI. With this funding, more productive AI models and services could be created. However, these investments come at a hefty cost.
On the positive side, Meta Platforms is on track to monetize new technologies as they gain traction. With this track record, META stock remains undervalued, and its current investments in AI and the metaverse will pay off in the following quarters.
AI Integration Driving Growth
Meta’s AI integration is central to its growth strategy. The company developed a range of AI services, including Meta AI. These services have advanced capabilities like responding to complex queries and building high-quality images in real time. Meta AI (on Llama 3) garnered positive feedback and high user engagement. The AI assistant is integrated into WhatsApp, Messenger, Instagram, and Facebook. This may boost the user experience and derive more online interactions.
Further, Meta AI’s technical capability to enrich app engagement directly impacts Meta’s ad revenue. For instance, about 30% of Facebook feed posts are now delivered by AI-computed recommendations. More than 50% of the content users see on Instagram is AI-recommended. Moreover, Meta’s Advantage+ tools leverage AI to optimize ad campaigns. This doubles the revenue from Advantage+ shopping and app campaigns annually. By automating campaign setup procedures, these technologies give marketers a competitive advantage and improved results.
To sum up, AI integration in ads is a sharp revenue-generating tool. There was a 20% rise in the overall ad impressions supplied across all of Meta’s services, demonstrating the increasing interaction on its platforms. The average cost per advertisement went up by 6%. Increased demand from advertisers is the source of this. This increase in pricing and ad impressions highlights Meta’s core capacity to monetize its user base and derive higher market value.
Open-Source AI Enhancements
Meta’s market lead and tech prowess emerged from its focus on open-source AI development. With 8 billion and 70 billion parameters, the Llama 3 model is the finest in its class, and the next 400+ billion parameter model may establish standards for the industry. This open-source strategy provides useful advantages. For instance, Meta’s AI models leverage community contributions to lower training costs and increase performance, improving cost edge. Additionally, open source may lead to faster and more collaborative development of AI systems.
Moreover, Meta’s AI-powered tools extend to hardware, like the Meta training and inference accelerator chip, which optimizes AI workloads, further reducing costs. This combination of advanced AI models and cost-efficient infrastructure indicates Meta’s strategic advantage in the AI market. As a result, in the first quarter, Meta total revenue of $36.5 billion, marking a 27% annual increase, indicating solid performance against currency fluctuations.
Meta’s Smart Ad Strategy
To minimize disturbance, Meta keeps optimizing advertisements inside organic interaction. This includes making sure that ads appear at the appropriate time and location. This strategy maximizes ad income while improving the user experience. Furthermore, Meta’s new advertisement ranking architecture, Meta Lattice, makes more precise ad modeling possible and improves advertisers’ performance.
Finally, Meta has a high chance of improving the edge of monetization through messaging and video, which are now less monetized than other services. Along with click-to-message advertisements and paid messaging on WhatsApp, the firm also concentrates on additional ways to derive enterprise messaging income.
In short, the company’s capability to boost user engagement, optimize ads, and make continuous AI investments makes META stock a solid buy. One should watch for further AI advancements with monetization strategies that could derive high value. Under the current trajectory, buying META stock at its current price could yield high long-term returns as the company scales its AI capabilities.
As of this writing, Yiannis Zourmpanos held a long position in META. 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 did not have (either directly or indirectly) any positions in the securities mentioned in this article.
