Meta Platforms (NASDAQ:META), the parent company of Facebook, has experienced a remarkable surge in its stock price, soaring 120% in the last six months. This outperforms the modest 5% increase in the S&P 500 index. Currently, META stock is approaching its 52-week high of $275.35, having risen by 14% in the past month and 126.5% year-to-date, significantly outpacing the 11.5% rise in the S&P 500 index.
That said, is META stock still worth investing in? Let’s discuss more of this in this article.
| META | Meta Platforms | $273.35 |
The Fundamentals
Over the past year, META stock has surged 37%, outperforming the S&P 500 index, which has only risen 2.5%. Despite its recent strong momentum and proximity to the 52-week high, META stock remains approximately 30% below its all-time high of around $384. This significant drop resulted from investor concerns about the company’s excessive spending on its Metaverse endeavors. So, although some may feel they missed the boat, there is still potential for gains.
iOS changes have disrupted user behavior tracking for apps and advertisers, but Meta showed a positive turn with a 3% revenue increase in Q1. The flagship “Family of Apps” segment also saw a 4% revenue growth during the quarter.
Despite experiencing declines in the past three quarters, the company rebounded with a notable 4.1% rise in ad revenue, totaling $28.1 billion. Moreover, there was a significant 26% increase in ad impressions. While the average price per ad declined by 17%, the substantial growth in the number of ad impressions outweighs this factor when evaluating overall advertising performance.
Meta Platforms and AI
Meta Platforms has utilized its open-source approach, similar to what made it a dominant player in the cloud industry during the 2010s, to drive its AI initiatives. By making its large language model, LLaMa, and Massively Multilingual Speech technology available for open development, Meta has unlocked the potential of AI. Critics argue that this open approach poses risks, but history has shown that open systems like the Internet and the cloud have thrived with increased collaboration. While Meta may not have been recognized as an AI leader in recent events, its vast user base and open software position it to potentially become a significant player in the field.
Meta’s growing cloud infrastructure and focus on optimizing its AI software stack are positioning it for the AI boom. This strategic move has made Meta’s stock highly sought after, akin to Nvidia. By prioritizing efficiency, Meta aims to be at the forefront of the AI revolution.
What Now?
The company currently has a monthly active user base of 3.81 billion across its Family of Apps, marking a 5% year-over-year increase. Despite already having nearly 4 billion active users, the company continues to seek avenues for growth. Expanding monetization efforts beyond the U.S. and Canada presents a significant opportunity for Meta to further enhance its revenue potential.
Meta’s strong cash position of $37 billion, minimal long-term debt of $10 billion, and significant stock buybacks in 2022 make it an attractive investment, despite trading near its 52-week highs. That said, the stock still has room to move higher if Meta continues to expand its user base and revenue potential.
On the date of publication, Chris MacDonald has a position in META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.