Meta Platforms Inc. (META) is up nearly 25% so far this year and despite trading at all-time highs, there are many reasons to invest in the stock. The stock price has closed in the green every single day since Donald Trump’s inauguration and is the only Mag 7 stock with double-digit gains this year.
What’s driving this bull run is what every investor wants to know. Is Mark Zuckerberg a changed man? He’s not as close to Trump as Elon Musk, but the change in policies just before Trump took over suggests the META boss is happy to side with the current president despite their history.
META’s bullish thesis is much simpler than people make it out to be. The company owns multiple ‘addictive’ platforms, as alluded to by Gene Munster, managing partner at Deepwater Asset Management, in a recent interview with CNBC. The company’s daily active users (DAU) are closing in on the 4 billion mark. For META, the business is all about finding ways to monetize these users rather than build new products.
Platforms like Instagram and WhatsApp are an integral part of many people’s daily lives, not just in the US but also across the globe. While other social media platforms do spring up from time to time, none have been able to beat META’s strength over a longer period of time. As long as META continues to monetize users addicted to its platforms, the bullish thesis remains intact.
META’s relationship with small and medium enterprises is also what drives its future prospects. SMEs are willing to spend more and more as the economy opens up. META drives most of its revenue from these companies and even if we debate whether the economy is in a healthy condition or not, the company continues to draw money out of these businesses thanks to its AI-powered advertising features.
Moreover, most of the Mag 7 stocks trade at a forward earnings multiple of 26. What separates META from the rest is its earnings growth, growing at 15% as compared to the 10% for the rest. This is a big advantage for the company. With earnings visibility into the future quite high and predictable to an extent thanks to its success in implementing AI advertising, META is easily the cheapest of the Mag 7 stocks. As long as META users are staying up all night to use its addictive apps, the investors can sleep well.
Meta Platforms Inc. is 3rd on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 235 hedge fund portfolios held META at the end of the third quarter which was 219 in the previous quarter. While we acknowledge the potential of META as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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