Stocks to buy

META Stock Analysis: 3 Reasons to Buy Meta Platforms Now

What a tear Meta Platforms (NASDAQ:META) has been on this year. Indeed, the tech giant remains a top choice for tech investors, given its robust AI presence. In 2024, META stock delivered four quarters of impressive results, including its first dividend and $40.1 billion in sales, surpassing estimates. 

CEO Mark Zuckerberg’s commitment to AI is evident through Meta’s Artemis AI chip development and recent board additions like Broadcom’s Hock E. Tan and John Arnold. 

Meta Platforms’ stock has surged 180% over the past 12 months, and trading near its all-time high, right around $500 per share at the time of writing. Investor confidence has returned as advertising rebounded, fueled by expanded buyback and dividend initiatives. Despite a trillion-dollar market cap, Meta lags behind Apple (NASDAQ:AAPL), whose iOS updates affected ad sales.

Despite the tough competition, META stock is still a hard-to-beat competitor. Here are three reasons why I think META stock is still a buy, even at these elevated levels.

Robust Financials and Outlook

In the fourth quarter, profit surged by 203%, exceeding previous increases of 31% and 168%. Sales growth also accelerated from 11% to 23% and 25%. Daily active Facebook users reached 2.11 billion, a 6% increase year-over-year. Additionally, operating margins rose to 41% from 20% in the prior year’s fourth quarter. Analysts anticipate 52% earnings growth in 2024 and 10% in 2025. Institutional buying surged, reflected in a B+ Accumulation/Distribution Rating.

Meta’s robust performance in 2023 likely bolstered management’s confidence in initiating a dividend. Free cash flow surged to nearly $44 billion, while cash and marketable securities reached $65.4 billion, surpassing its $18.4 billion debt. Revenue growth accelerated, with a 25% increase in the fourth quarter, contrasting with a 4% decline a year ago. 

Total 2023 revenue rose 16% while operating costs increased by just 1%, showcasing impressive operating leverage. This disciplined approach fueled substantial cash generation, positioning Meta as a prime candidate for dividend payouts alongside stock repurchases, a strategy already underway by management.

Meta’s financial analysis suggests it could have initiated dividends earlier. Despite a 50% decline in free cash flow in 2022, it remained at $19 billion. Shareholders benefited indirectly through $31.5 billion in stock buybacks, showcasing Meta’s commitment to returning capital. However, it had yet to introduce dividends.

Solid Stance in AI and Tech Race

Post-rebranding, Meta Platforms has become a pioneer in AI integration in the metaverse, boosting immersive experiences with features like voice commands and custom AI chips.

Based on projections, Meta likely won’t surpass Apple’s valuation over any time frame, but it holds more significant potential for growth at least in the near-term. Indeed, META stock would need to double to match Apple’s market cap, with many pointing to AI as the reason for such a move. However, despite Apple’s low single-digit earnings growth and high valuation, it’s also true that Meta looks relatively expensive compared to its top- and bottom-line growth numbers right now.

Still, plenty of attention will remain on the Meta Quest headset as a value alternative to Apple’s Vision Pro. Partnering with LG Electronics, Meta aims to bolster its XR business, enhancing its virtual and augmented reality position. With ventures into AI-driven advertising, social media, and the metaverse, Meta remains poised for substantial growth, justifying its 32.6 price-earnings multiple.

Strong Analyst Confidence

Meta stock broke out from a three-week tight pattern, hitting a high of more than $500 per share. This move has been driven by strong demand for retail and institutional investors, inviting analysts to revise theri price targets higher.

The IBD Leaderboard stock hit a record high on Feb. 23, with a 38% gain year-to-date. Approaching $500, META stock has soared since late October, riding its 10-week moving average with muscular relative strength. Additionally, BofA Securities raised Meta Platforms’ price target to $425 from $405, citing potential growth drivers like digital advertising and reel performance. These analysts currently maintain a buy rating on the stock.

Buy and Hold META Forever

I’ve been pounding the table on META stock for years, even as the stock was declining during the previous bear market. Much of that has to do with the company’s core cash cow of a business, and its ability to remain flexible in investing in the businesses of the future. I think Meta has the right management team for the job, and remains a stock worth owning here.

Yes, Meta is much more expensive than it’s been in some time. But it’s my view that investors looking for a growth stock to hold for the next decade or longer really can’t go wrong with this name right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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