With the Nasdaq Composite at new highs due to a few tech firms, investors may be asking if there are any decent deals today. I can confirm that there are good opportunities. One is Meta Platforms (NASDAQ: META). The social media specialist's shares have risen 277% in 18 months. It still seems like a stock to buy. Here's why
Its unparalleled size Meta is unique in its reach with 3.98 billion monthly active users across Facebook, Messenger, WhatsApp, and Instagram. Nearly half of the world's population uses Meta services monthly.
Meta earns 98% of its revenue from digital advertising in 2023 because these apps are free. The 2022 downturn showed that ad sales are cyclical, yet they are profitable. The company's apps had a great 54% operating margin in Q4.
More importantly, Meta enables platforms for individuals to use various social networking apps without creating content. This has strong network effects. Everyone wants to utilize the social networking apps their friends and family use. Meta's services improve as more users join and share content. This gives me confidence that the company's competitive moat will shield it from upheaval and ensure long-term success.
A focus on innovation AI has been the hot subject lately, and firms are trying to lead this potentially revolutionary technology. Investors want to uncover winners early, but don't overthink it. Technology and internet leaders like Meta can benefit.
AI has been added to the company's apps to improve user experience. For advertising, Meta uses generative AI to reduce time and improve outcomes. This should allow Meta to demand higher ad prices over time, given its unmatched ability to move target-specific audiences.
The Reality Labs section houses its metaverse goals. Meta is developing augmented and virtual reality projects that CEO Mark Zuckerberg thinks could establish a new computing platform. This area loses billions every quarter, but it might be a significant moneymaker down the road.
Reasonable value In late 2022, Meta shares traded at a forward P/E of 10. Investors wanted to acquire them. They were unhappy with decreasing ad growth and squeezed margins, and reality labs losses were rising.
After rising in the past year and a half, Meta's stock remains attractive. Given the company's social media apps' reach, network effects, and AI focus, the forward P/E of 26 is a good entry point. Opportunities remain as the stock market hits record highs. Meta fits here.
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