A company has to spend a lot of money now in order to grow and succeed later on. This seems to be the philosophy of Meta Platforms (NASDAQ:META) and its chief executive, Mark Zuckerberg.
You’ll need to be on board with Meta Platforms’ mega-sized investments in artificial intelligence technology if you want to buy and hold Meta stock.
There are no guarantees here, but Meta Platforms’ AI investments will probably yield the desired results in the long run.
Still, it’s fine for the shareholders to keep tabs on Meta Platforms’ spending in the coming quarters. If that spending gets out of control, you’re certainly not required to hold your Meta shares forever.
Meta Platforms Beats Wall Street’s Forecasts
It’s difficult to argue with Meta Platforms’ second-quarter 2024 financial results. The company generated $39.07 billion in revenue, beating Wall Street’s consensus call for $38.3 billion. Even the skeptics can’t deny that Meta Platforms is raking in a boatload of advertising dollars.
Furthermore, Meta Platforms reported Q2-2024 earnings of $5.16, handily beating the analysts’ consensus estimate of $4.74. Thus, even if Meta Platforms is spending a lot of money, the company is currently generating enough revenue to cover its expenses and then some.
With the release of Meta’s quarterly results, Zuckerberg engaged in some well-deserved bragging.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” he declared.
It appears, then, that Meta Platforms’ AI spending is probably necessary and worthwhile.
Meta Platforms Prepares for ‘Significant’ Expenditures
Meta Platforms Chief Financial Officer Susan Li acknowledged that “infrastructure costs will be a significant driver of expense growth next year” for the company. Only time will tell how “significant” Meta Platforms AI-infrastructure spending will be.
Needham analyst Laura Martin is concerned about Meta Platforms’ capital-spending plans for generative AI as well as the metaverse. “GenAI and Metaverse are two enormous uses of capital, with unclear returns,” Martin cautioned.
It would have been nice if Meta Platforms had provided more clarity on its planned expenditures in these areas. That’s why investors shouldn’t just buy Meta Platforms and hope for the best.
The idea is to be an informed investor and stay attuned to the data. Be ready to bail on a company – whether it’s Meta Platforms or any other company – if it’s not exercising at least a minimum degree of capital discipline.
Meta Stock: Still a Worthy Long-Term Holding
Martin’s concerns about Meta Platforms’ capital spending are understandable. However, we don’t fully agree with Martin’s outright “sell” rating on Meta Platforms shares.
Over the long term, Meta Platforms’ expenditures on AI projects will likely yield good financial results. At the same time, investors should keep an eye on Meta Platforms’ spending habits.
The idea is to make sure that Meta Platforms’ capital outlays aren’t getting completely out of control. Therefore, Meta stock earns a “B” grade and should be an appropriate holding for investors who are willing to stay informed about Meta Platforms.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
