Social media giant Meta Platforms is Thursday's IBD 50 Growth Stocks To Watch pick as shares recover from a recent sell-off. In addition to running its Facebook, Instagram and WhatsApp social media sites, it has branched out into artificial intelligence and AI smart glasses.
Its Meta AI is an assistant that can answer questions, give advice and create images.
"We've released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we're driving good growth across our apps," Meta Chief Executive Mark Zuckerberg said in the company's second-quarter earnings report.
But Meta looks to have competition in the AI smart glasses arena, as Qualcomm, Alphabet and Samsung Electronics are partnering on their own endeavor to make a similar product.
A Magnificent Seven stock, Meta ranks No. 1 out of 72 stocks in the internet-content group, which holds a weak No. 137 spot out of Investor's Business Daily's 197 industry groups.
Cantor Fitzgerald initiated coverage on the Facebook parent with an overweight rating and a 660 price target Thursday. That's about 27% higher than the Instagram stock's current price.
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Meta Stock Climbs Back
Meta stock is emerging from a previous stage-three cuplike base with a 542.81 buy point. The base formed after a cup-with-handle base breakout faded in early July.
The stock bypassed the entry point and reached a record high on Aug. 22 in average volume, but shares retraced and closed lower. The drop started a sell-off which ended Wednesday with the social media stock bouncing off its 50-day moving average.
Shares dropped 7% from the 542.81 buy point Wednesday morning, technically triggering a sell signal, but quickly reversed higher.
Meta stock is climbing Thursday and is testing its 21-day exponential moving average.
Its relative strength line has been in a jagged sideways trend since February. Shares have gained 47% year to date.
Profit Growth Continues, But At Slower Pace
Meta posted better-than-expected second-quarter earnings and sales late on July 31. Profit grew 60% on 22% revenue growth.
"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," Zuckerberg said in the earnings release.
FactSet forecasts show earnings growth slowing to 18% for the next two quarters then down to 9% and 10% increases. Further, sales growth looks to temper to the 13% to 17% range over the next four quarters.
Analysts recently raised 2024 profit estimates to $21.29 per share, or 37% growth. In 2025, they see earnings rising 14% to $24.20 per share.
Mutual funds have been adding the Facebook and Instagram parent to their holdings, with 6,290 owning shares in June, up from 6,219 in March and 5,774 in December.
The respected Fidelity Contrafund owned 41.21 million shares, while JPMorgan Large Cap Growth Fund held 10.5 million shares as of the June quarter. Both, however, trimmed their Meta stock positions modestly in the quarter.
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