Over the last year, a big contributor to the momentum in the market has been hype around artificial intelligence (AI). The overall bullish outlook on the technology seems to have carried over into 2024. This week, the S&P 500 closed at an all-time high level of 4,868.55.
Some of the biggest contributors to the market over the last 12 months are the “Magnificent Seven” stocks — a moniker used to describe the largest technology enterprises by market cap. As of the time of this article, five of the Magnificent Seven stocks boast market capitalizations of over $1 trillion — Apple, Microsoft, Alphabet, Amazon, and Nvidia. However, with a market cap of $980 billion, Meta Platforms (NASDAQ: META) could very well be the next to join and firmly remain in the exclusive club.
In 2023, Meta stock returned 194% — handily outperforming the broader markets. With such outsize returns and the overall market soaring to new highs, is it time to book some gains in Meta stock?
A thorough analysis of the company’s financial and operational picture may show that the stock trades for a bargain. Let’s look at Meta and assess if now is a good opportunity to scoop up some shares.
Meta’s financial profile is rock-solid
In 2022, Meta made a big bet on virtual reality (VR) as it turned its focus to the metaverse. However, investors quickly soured on these new ambitions as the company’s revenue decelerated and expenses rose. While the metaverse is still part of the company’s long-term vision, Meta spent much of 2023 returning to its advertising roots and right-sizing its cost profile.
Through the first nine months of 2023, Meta’s total revenue increased 12% year over year, while free cash flow grew by 140%. A return to advertising growth coupled with multiple rounds of layoffs helped Meta get back on track. As such, the company has been able to swiftly reinvest these excess profits back into the business.
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What growth drivers does the company have?
When it comes to AI, Meta has a couple of interesting opportunities.
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First, the company already has a series…
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