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Meta Platforms (META) stock has been given a big thumbs up by investors over the past few quarters. Despite META's 14.5% correction from its late July highs, shares are still up over 216% from last November's lows. If anything, the recent dip in the stock may serve as a great buying opportunity for investors who missed the massive upside move.
Though things are finally looking up for Meta - the company topped earnings estimates for two consecutive quarters, while also hopping aboard the artificial intelligence (AI) train - it's hard to look past the considerable magnitude of multiple expansion the stock has experienced in recent months. At the time of this writing, META stock trades at 36.9 times trailing price-to-earnings. Indeed, it's hard to imagine that less than a year ago, the stock had a P/E ratio in the teens!
Though the price of admission has swelled at a pace quicker than earnings growth, I do think Meta stock warrants the premium price tag as it winds down its “Year of Efficiency” in exchange for what could be a year of growth re-acceleration on the back of cutting-edge technologies. From augmented reality (AR) glasses to generative AI innovations, Meta Platforms seem to have all the right growth drivers that could help earnings catch up to the still-swollen price tag.
Meta's pipeline of innovation is worth a premium multiple on its own. With the proven ability to turn innovative new concepts into cash profits, I'd argue shares have the means to become a heck of a lot more expensive over the coming months and quarters, as investors discover how these new innovations stand to enhance (or evolve) the company's existing platforms and social media apps.
Meta Platforms May Be the AI Company That Shines Bright in 2024
Despite an ugly performance for the stock in 2022, it didn't take long for investors to get excited about shares of Meta again. After deep staffing cuts, the company is poised to ride high on the AI wave, perhaps even higher than some of its technology peers.
Undoubtedly, AI has been the buzzword of 2023 - but in 2024, the big question is which companies can actually turn AI technologies into cash flows. And though it seems like nearly every company has some kind of skin in the game at this point, I do think very few players can turn AI innovation into sales (and profits) as well as Meta Platforms.
Meta doesn't just have impressive tech talent going for it; the company has a massive network to showcase its latest AI innovations, along with monetization know-how. Eventually, investors will want AI-driven earnings growth, not just promises of it a few years from now. Blame interest rate hikes, if you like, but AI companies will need to walk the walk after talking the talk for nearly a year! Indeed, Nvidia (NVDA) has shown us all that AI is more than just a buzzword or hot trend; it's a growth engine that has the potential to help companies pole vault over seemingly sky-high expectations.
Last month, Meta launched the latest iteration of its generative AI chatbot. Its second version of the LLaMa (Large Language Model Meta AI) is reportedly open source, and involves a partnership with Microsoft (MSFT). Undoubtedly, a growing number of chatbots out there aim to dethrone OpenAI's ChatGPT. And though the LLaMa 2 may not be a clear winner in the AI race just yet, I think it's a worthy horse that long-term investors may wish to bet on.
For now, the LLaMa 2 won't make use of Meta's treasure trove of data from its social media family of apps (including Facebook, Instagram, and Threads). Though Meta does have a clear data advantage, I'd argue it's prudent not to open the data floodgates just yet. Indeed, it does seem like Meta has learned from its past mistakes.
Meta's AR Glasses Look Intriguing
As Meta continues betting big on AI, the company is also poised to move forward with its AR, VR, and metaverse roadmap. The company is reportedly working on producing around 1,000 new AR glasses for 2024. Indeed, smart glasses are an ambitious step up from those bulky headsets. However, a 2024 launch might be a tad too ambitious, according to various sources.
With Apple (AAPL) poised to release its own very first AR device in the U.S. early next year, there's no question that Meta wants to one-up its long-time FAANG rival with a product that's a few steps ahead. For now, I'm unsure that CEO Mark Zuckerberg can upstage Apple in a year that's sure to be full of iPhone-like moments.
The Bottom Line on Shares of Meta Platforms
Meta stock is expensive right now, but it could become even more expensive if AI innovations hit the spot - even if its coming AR glasses end up a flop.
On the date of publication, Joey Frenette had a position in: AAPL . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
