Meta Platforms Stock Is Soaring. Is It Too Late to Buy?
Shares of Meta Platforms (NASDAQ: META) have delivered explosive returns to investors since bottoming out in 2022, and the stock continues to hit new highs. The stock surged recently after the company reported strong revenue and earnings performance in the fourth quarter. Despite the stock's monster run, it still offers upside. The shares are trading at a reasonable earnings multiple of 30, consistent with the S&P 500 (SNPINDEX: ^GSPC) average. Moreover, the latest earnings report revealed a few catalysts that are boosting investor confidence in the social media leader's growth prospects.
Here are three reasons the stock is a buy:
Capital Spending Acceleration in Big Tech Companies
Big tech companies have accelerated their capital spending over the last year to support the build-out of technology infrastructure for artificial intelligence (AI). Meta Platforms has doubled its capital expenditures over the last three years, with impressive earnings growth and a record return on capital of 33.6% last year.
Meta AI and Andromeda Driving Growth
Meta Platforms' revenue growth is attributed to its AI strategy, including Meta AI and the collaboration with AI chip leader Nvidia on Andromeda. These initiatives aim to improve user engagement and advertising performance, potentially reaching over 3.3 billion daily active users.
Potential of AI Use Cases
Meta's Ray-Ban AI glasses and the company's optimism about future sales indicate further growth opportunities in AI. While the success of such products remains uncertain, they could significantly impact Meta Platforms' AI strategy and stock performance.
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