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Is META the Best Stock to Buy Among Magnificent 7 Right Now?
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Meta Platforms (META - Free Report) is one of the most prolific users of AI, leveraging it to improve the potency of its platform offerings, including WhatsApp, Instagram, Messenger and Facebook. These services currently reach more than 3.2 billion people daily.
Its staggering reach and increasing ad impressions (up 10% year over year in second-quarter 2024) make META one of the most important players in the digital ad sales market apart from Google and YouTube parent Alphabet (GOOGL - Free Report) , its peer in the “Magnificent 7.” The group also includes Microsoft, NVIDIA (NVDA - Free Report) , Amazon, Apple and Tesla (TSLA - Free Report) .
META’s growing proficiency with AI usage helped it to report terrific second-quarter results, with both earnings and revenues beating the Zacks Consensus Estimate comfortably.
User growth remained solid in the United States, with WhatsApp reaching more than 100 million monthly users and Thread approaching 200 million milestone. It witnessed good year-over-year growth across Facebook, Instagram and Threads.
META’s advertising revenues (99% of Family of Apps revenues) increased 21.7% year over year to $38.33 billion and accounted for 97.9% of second-quarter revenues. At constant currency, revenues increased 23% year over year.
META Stock Outperforms Magnificent 7 Peers
Meta Platforms has outperformed its Magnificent 7 peers in the past month. In fact, it is the only stock that has recorded positive return during the period, while the rest of the six declined, with Tesla dropping more than 20% and NVIDIA losing over 18%. META’s closest peer, GOOGL, lost 12.3%.
META’s One-Month Performance
Image Source: Zacks Investment Research
Year-to-date, META shares have gained 46.3%, outperforming the Zacks Computer & Technology sector’s return of 14.1%. Except for NVIDIA, it has outperformed the rest of Magnificent 7 over the same time frame.
YTD Performance
Image Source: Zacks Investment Research
META Integrates AI Tools in its Offerings
Meta Platforms has been leveraging AI and machine learning to boost the potency of its social-media offerings, including WhatsApp, Instagram, Facebook and Threads. It has been improving the quality of recommendations to drive engagement.
Meta Platforms is leveraging AI to boost Facebook’s appeal among young adults (18–29-year-olds), a demography that used to prefer Alphabet’s YouTube and Snapchat. Moreover, it rolled out a full-screen video player and unified video recommendation service across Facebook, extending its unified AI systems, thereby increasing engagement on Facebook Reels.
META is incorporating AI tools into WhatsApp to make businesses more customer-oriented. The rapid adoption of Generative AI (GenAI) is transforming conversational messaging platforms like WhatsApp to perform conversational commerce, including transactions like ride-hailing and grocery purchases.
It has started rolling out Meta AI and is on track to achieve its goal of becoming the most used AI assistant by the end of the year. Meta AI is currently available in more than 20 countries and eight languages. In the United States, Meta Platforms is rolling out new features like Imagine edit, which allows people to edit images they generate with Meta AI.
The launch of the AI studio is an interesting addition to META’s expanding AI features. AI studio helps creators create AIs to interact within apps across the company’s service offerings.
META’s Llama family of foundation models has been a game changer. The latest Llama 3.1 includes the first frontier-level open-source model, as well as new and industry-leading small and medium-sized models. It is already working on Llama 4, which is expected to boost META’s capability in the long run.
Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $21.23 per share, up 3.3% over the past 30 days, indicating a 42.77% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $5.12 per share, up 5.3% over the past 30 days, indicating a 16.63% year-over-year increase.
Meta Platforms expects total revenues between $38.5 billion and $41 billion for the third quarter of 2024, assuming an unfavorable forex impact of 2% to year-over-year revenue growth.
The Zacks Consensus Estimate for third-quarter 2024 revenues is currently pegged at $40.08 billion, suggesting 17.39% year-over-year growth.
META Stock Overvalued
However, META stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, META is trading at 7.48X, higher than its median of 6.57X and the Zacks Computer & Technology sector’s 6.36X.
Price/Sales Ratio (TTM)
Image Source: Zacks Investment Research
Conclusion
Although higher investments in AI infrastructure development and increasing losses in the reality labs business are risks, Meta Platforms’ AI focus bodes well for its long-term prospects.
META’s growing footprint among young adults driven by improving recommendations boosts competitive prowess. AI usage is making it a popular name among advertisers that is expected to drive top-line growth.
Image: Bigstock
Is META the Best Stock to Buy Among Magnificent 7 Right Now?
Meta Platforms (META - Free Report) is one of the most prolific users of AI, leveraging it to improve the potency of its platform offerings, including WhatsApp, Instagram, Messenger and Facebook. These services currently reach more than 3.2 billion people daily.
Its staggering reach and increasing ad impressions (up 10% year over year in second-quarter 2024) make META one of the most important players in the digital ad sales market apart from Google and YouTube parent Alphabet (GOOGL - Free Report) , its peer in the “Magnificent 7.” The group also includes Microsoft, NVIDIA (NVDA - Free Report) , Amazon, Apple and Tesla (TSLA - Free Report) .
META’s growing proficiency with AI usage helped it to report terrific second-quarter results, with both earnings and revenues beating the Zacks Consensus Estimate comfortably.
User growth remained solid in the United States, with WhatsApp reaching more than 100 million monthly users and Thread approaching 200 million milestone. It witnessed good year-over-year growth across Facebook, Instagram and Threads.
META’s advertising revenues (99% of Family of Apps revenues) increased 21.7% year over year to $38.33 billion and accounted for 97.9% of second-quarter revenues. At constant currency, revenues increased 23% year over year.
META Stock Outperforms Magnificent 7 Peers
Meta Platforms has outperformed its Magnificent 7 peers in the past month. In fact, it is the only stock that has recorded positive return during the period, while the rest of the six declined, with Tesla dropping more than 20% and NVIDIA losing over 18%. META’s closest peer, GOOGL, lost 12.3%.
META’s One-Month Performance
Image Source: Zacks Investment Research
Year-to-date, META shares have gained 46.3%, outperforming the Zacks Computer & Technology sector’s return of 14.1%. Except for NVIDIA, it has outperformed the rest of Magnificent 7 over the same time frame.
YTD Performance
Image Source: Zacks Investment Research
META Integrates AI Tools in its Offerings
Meta Platforms has been leveraging AI and machine learning to boost the potency of its social-media offerings, including WhatsApp, Instagram, Facebook and Threads. It has been improving the quality of recommendations to drive engagement.
Meta Platforms is leveraging AI to boost Facebook’s appeal among young adults (18–29-year-olds), a demography that used to prefer Alphabet’s YouTube and Snapchat. Moreover, it rolled out a full-screen video player and unified video recommendation service across Facebook, extending its unified AI systems, thereby increasing engagement on Facebook Reels.
META is incorporating AI tools into WhatsApp to make businesses more customer-oriented. The rapid adoption of Generative AI (GenAI) is transforming conversational messaging platforms like WhatsApp to perform conversational commerce, including transactions like ride-hailing and grocery purchases.
It has started rolling out Meta AI and is on track to achieve its goal of becoming the most used AI assistant by the end of the year. Meta AI is currently available in more than 20 countries and eight languages. In the United States, Meta Platforms is rolling out new features like Imagine edit, which allows people to edit images they generate with Meta AI.
The launch of the AI studio is an interesting addition to META’s expanding AI features. AI studio helps creators create AIs to interact within apps across the company’s service offerings.
META’s Llama family of foundation models has been a game changer. The latest Llama 3.1 includes the first frontier-level open-source model, as well as new and industry-leading small and medium-sized models. It is already working on Llama 4, which is expected to boost META’s capability in the long run.
Estimate Revision Shows Upward Movement
The Zacks Consensus Estimate for 2024 earnings is pegged at $21.23 per share, up 3.3% over the past 30 days, indicating a 42.77% year-over-year increase.
The consensus mark for third-quarter 2024 earnings is pegged at $5.12 per share, up 5.3% over the past 30 days, indicating a 16.63% year-over-year increase.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Meta Platforms expects total revenues between $38.5 billion and $41 billion for the third quarter of 2024, assuming an unfavorable forex impact of 2% to year-over-year revenue growth.
The Zacks Consensus Estimate for third-quarter 2024 revenues is currently pegged at $40.08 billion, suggesting 17.39% year-over-year growth.
META Stock Overvalued
However, META stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, META is trading at 7.48X, higher than its median of 6.57X and the Zacks Computer & Technology sector’s 6.36X.
Price/Sales Ratio (TTM)
Image Source: Zacks Investment Research
Conclusion
Although higher investments in AI infrastructure development and increasing losses in the reality labs business are risks, Meta Platforms’ AI focus bodes well for its long-term prospects.
META’s growing footprint among young adults driven by improving recommendations boosts competitive prowess. AI usage is making it a popular name among advertisers that is expected to drive top-line growth.
META currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.