- Meta Platforms is recommended as a buy due to its AI success, attractive valuation, clean balance sheet, and potential in VR technology.
- Recent earnings showed strong growth with a 22% revenue increase and 73% EPS growth, driven by effective cost management and AI investments.
- META’s AI-driven advertising tools, like Advantage+, enhance advertiser returns and position Meta to capture more digital advertising spend.
- Despite risks from AI investments and Reality Labs losses, Meta’s core business remains highly profitable, making it a compelling investment.
Introduction
Meta Platforms, Inc. (NASDAQ:META) is a well-known internet social media giant. Since its founding as Facebook in 2004, the last 20 years have seen the firm undergo a rapid ascent. Laden with successful strategic acquisitions and public controversy along the way, the firm is entering a new phase. This next phase, in my opinion, is where Meta and its big tech peers pivot to being AI first companies. Based on recent earnings, Meta’s early AI efforts look to be bearing fruit in boosting user engagement on its platforms.
Additionally, shares trade at an attractive valuation relative to recent history and against big tech peers. Investors have expressed concerns in recent years about the substantial losses at the virtual reality segment known as Reality Labs. The Reality Labs losses are well understood now by the market and suitably baked into the stock price. While I don’t expect a near-term takeoff of the virtual reality business, I view Meta’s positioning as an interesting call option on the tech. I initiate Meta as a buy given its tangible AI success today, attractive valuation, clean balance sheet and VR tech positioning.
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