Meta Platforms' Stock Soars: AI, Metaverse, and Zuckerberg's Vision Drive Unprecedented Growth

Here's the Key Reason Meta Platforms Stock Has Soared 464% Since 2022 -- Hint: It's Not Artificial Intelligence (AI) | The Motley Fool

CEO Mark Zuckerberg had to make some tough decisions to reverse Meta's plummeting stock price a couple of years ago. In November 2022, Meta Platforms (META -1.93%) stock bottomed at around $90 following a 76% plunge from its all-time high. Investors felt the company was neglecting its core social media platforms, Facebook and Instagram, in favor of spending billions of dollars on projects like the metaverse, which generated minimal revenue. That strategy placed significant pressure on Meta's profitability. CEO Mark Zuckerberg decided to make some drastic changes. By mid 2023, he had cut over 21,000 jobs, committed to spending more cautiously on the metaverse, and invested heavily in artificial intelligence (AI) to enhance Facebook and Instagram, which is already paying off with increased engagement (which leads to more advertising revenue). Meta's reduced workforce and streamlined cost structure drove a surge in its profitability. In the recent second quarter of 2024 (ended June 30), Meta's net income grew by 73% from the year-ago period, and that followed a more than doubling in net income during each of the previous three quarters: Meta's improved profitability sent its stock tearing higher by 464% from its November 2022 low point, to trade at over $508 as of this writing. But it's probably not done. The company's net income over the last four quarters translated into $19.59 in earnings per share, placing its stock at a price-to-earnings (P/E) ratio of 25.9. That's a 16% discount to the 30.9 P/E ratio of the Nasdaq-100 index, implying Meta stock is still undervalued relative to its big-tech peers. While Meta is developing AI like most tech giants, this is a good reminder that stock price performance is often driven by a company's earnings power, rather than the latest hot trend.

Mark Zuckerberg Just Made a Stunning Prediction. Is Meta Platforms Now a Must-Own AI Stock? | The Motley Fool

Despite its focus on its LLaMa large language model and new devices like Ray-Ban smart glasses, discussions revolving around investments in top artificial intelligence (AI) stocks have mostly excluded Meta Platforms (META -1.93%). Instead, Nvidia is considered the clear leader in AI hardware, while the financial media has portrayed Microsoft and Alphabet as battling for supremacy in user-facing AI, including chatbots like ChatGPT and Gemini, cloud infrastructure, and productivity software. But Meta is proving that potential investors can't continue ignoring its advances in the AI space. The stock has soared since the generative AI race began with the launch of ChatGPT, and it has outpaced its peers in the "Magnificent Seven", like Microsoft and Alphabet, in revenue growth over the last four quarters. Meta just reported 22% revenue growth to $39.1 billion in the second quarter, and operating income surged 58% to $14.8 billion as the company benefits from earlier layoffs and other cost controls. However, while investors were impressed by the company's results, sending the stock up 7% after hours, there was one statement in particular from CEO Mark Zuckerberg that could be a game changer for Meta Platforms. Zuckerberg began the earnings release by telling investors, "Meta AI is on track to be the most used AI assistant in the world by the end of the year." That's a statement that few analysts would have expected to be true a year ago While ChatGPT has gotten much of the attention in the generative AI race, Meta AI is emerging as a dark horse, ready to displace the chatbot that kicked off the generative AI era. If Zuckerberg is correct, Meta's AI chatbot will be ahead of ChatGPT, Microsoft's Copilot, and Alphabet's Gemini, making his company the leader in generative AI, at least according to one key metric, usage. Much like Apple has with its iPhone, Meta's properties, which include Facebook, Instagram, and WhatsApp, have allowed it to establish close relationships with customers. That's something that Microsoft and Alphabet's Google don't have, because their AI properties are mostly used for work or research. Beyond Meta's surprising forecast for its chatbot, Zuckerberg also painted a compelling vision for the company's future in AI. For example, he envisions his company using AI to generate creative content for advertisers and personalize it for its intended audience. Eventually, Zuckerberg sees the technology being able to handle the entire marketing campaign with just a business objective and a budget. That would be a huge win for the advertisers that make up the company's customer base. He also said Meta wants to provide every business on his platform with an AI agent, and he believes this will be a staple of commerce in the future. The success of Meta AI is also reflected in the company's broad and growing reach. It finished the quarter with 3.27 billion daily active users, up 7% from the year before -- or more than 40% of the world's population. The average American adult spends 34 minutes a day on Meta properties, showing why the company is poised to take the lead in AI assistants. Before ChatGPT was launched, Zuckerberg said it was incumbent that Meta control the next computing platform. At the time, he envisioned that as the metaverse, but it now seems clear that it will be generative AI, and Meta looks to be just as ready for that transition. The company doesn't have a direct way to monetize Meta AI, but it doesn't need one. As it grows and engages its audiences, businesses will spend more money on advertising to reach them and sell more products and services through its sites, growing Meta's revenue and strengthening its platforms in turn. The company continues to burn billions of dollars each quarter on Reality Labs, and it's unclear if that experiment will ever pay off. However, the core business is profitable enough to support that adventure, and Meta still trades at a modest valuation. Based on its after-hours price Wednesday, the stock is valued at a price-to-earnings ratio of 26.5, essentially in line with the S&P 500. But Meta Platforms is still seeing explosive growth, and it now looks to be a surprising winner in the AI chatbot race. The stock belongs in any AI portfolio and should continue climbing given its momentum, its extensive reach through its apps, and its prowess in artificial intelligence.

Meta Platform Shares Jump on Strong Forecast. Is It Too Late to Buy the Stock? | The Motley Fool

Share prices of Meta Platforms (META -1.93%) bolted higher after the owner of Facebook and Instagram reported strong second-quarter results and issued upbeat guidance. The stock has been a great performer this year, up about 40%. Artificial intelligence (AI) continues to be a major focus for the social media company, with Meta ready to invest significant money into its newest large language model (LLM) Llama 4. Let's dive into Meta's Q2 earnings report and guidance as well as its AI ambitions and whether the stock remains a buy after the run-up in the stock this year. Meta grew its Q2 revenue by 22% year over year to $39.1 billion. Ad revenue climbed 22% to $38.3 billion, while Reality Labs, which is developing Meta's metaverse and the Quest Headsets used to access it, grew revenue by 28% year over year to $353 million. Operating income from Apps came in at $19.3 billion, while Reality Labs produced a loss of $4.5 billion. Earnings per share (EPS) soared from $2.98 a year ago to $5.16. Family daily active people (DAP), which measures registered users that log into one of its apps on a daily basis, rose nearly 7% year over year to 3.27 billion in June. Family average revenue per person (ARPP), meanwhile, climbed 14% to $11.89. Threads, its newest app, which is akin to X (formerly Twitter), was a standout, reaching 200 million monthly users. WhatsApp, a messaging app that has long been popular overseas, has reached over 100 million active users in the U.S. The company also said it was seeing good traction in adding young adult users to Facebook. Ad impressions jumped 10% year over year, while the average price per ad also increased 10%. Growth in average price per ad was particularly strong in Europe where it grew 18%. Looking ahead, the company expects third-quarter revenue to be between $38.5 billion and $41 billion. The midpoint of $39.75 billion was well ahead of analyst expectations for Q3 revenue at $39.1 billion. It also increased the low end of its full-year capital expenditure (capex) forecast to a range of $37 billion to $40 billion, up from a prior range of $35 billion to $40 billion. Next year, it is looking to significantly increase that number as it invests in AI research and product development. It said the computing power needed to train its next-generation LLM Llama 4 will likely be 10 times more than was needed to train Llama 3, while future models will continue to need more and more computing power. Meta said at this point it would rather build more capacity than it needs than be too late doing so. Meta's core social media advertising business is performing well, with users, ad impressions, and ad rates all up nicely. Video and in-feed recommendations are leading to more engagement and helping drive revenue. The company's sites are still among the top places for advertisers to spend their ad dollars. Meanwhile, Meta is investing heavily in AI and will look to profit from it in the future. The company has a history of building out products and gaining large user bases before monetizing them, and this appears to be the strategy here. However, with losses piling up with Reality Labs and now the expected big spending on AI, this could become a point of contention with investors down the line. However, Meta has a pile of cash on its balance sheet and generates robust cash flow, so it certainly has the resources to make these investments. At this point, the investment in AI looks like a good bet to make, while the metaverse is still a bit more questionable. From a valuation standpoint, the company is now trading at a forward price-to-earnings (P/E) ratio of just 21 based on 2025 analyst estimates. That is certainly a reasonable valuation for a company that owns some of the most attractive sites for advertisers around the globe. Meanwhile, it could prove to be downright cheap if its bets on AI and the metaverse eventually pay off. Taking that all together, I think investors with a long-term outlook can still buy the stock at current levels.