UBS’ Best Stocks In The AI, Growth & Low Rates Era: Top 29 US Stocks

4. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Investors In Q2 2024: 219

UBS’ Sector Rating: Attractive

Sector: Communications Services

Meta Platforms, Inc. (NASDAQ:META) is the firm that owns and operates Facebook, WhatsApp, and Instagram. Its user base of 3.2 billion makes it one of the biggest in the world. It also makes Meta Platforms, Inc. (NASDAQ:META) indispensable to the global advertising industry, with the firm relying on advertiser revenue for most of its sales. As of H1 2024, 98% of Meta Platforms, Inc.’s (NASDAQ:META) $75.5 billion in revenue came through advertising. Consequently, the firm tends to perform well when economic output is high and businesses have a greater ability to spend on marketing. Additionally, its dominance in the social media industry has lent Meta Platforms, Inc. (NASDAQ:META) sizable resources of $32 billion in cash and equivalents. These, in turn, have enabled it to establish a foothold in the artificial intelligence industry and develop a foundational AI model. The billions that Meta Platforms, Inc. (NASDAQ:META) has invested in AI mean that generating AI profits is now a key part of its hypothesis. This is through its advertising AI features for businesses, and consumer-facing AI features that involve image editing. Additionally, another central tenet of Meta Platforms, Inc.’s (NASDAQ:META) hypothesis is its AI spending. The more the firm spends, the less money it can allocate for other plans, and investor expectations of a return also grow. This was evident after Meta Platforms, Inc.’s (NASDAQ:META) Q3 earnings that saw shares drop by 3% after it upgraded 2024 CapEx spending to $38 billion to $40 billion from an earlier $37 billion to $40 billion.

Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter. Here is what the fund said:

“Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”