Source: PaxForex Premium Analytics Portal, Fundamental Insight
Meta Platforms has firmly established itself as a dominant player in the internet economy. With a portfolio that includes widely used apps like Facebook, Instagram, and WhatsApp, Meta connects billions of users worldwide. Founder and CEO Mark Zuckerberg’s achievements in building this digital empire are nothing short of impressive.
But is this "Magnificent Seven" stock worth adding to your portfolio right now? Here's why it might be.
Meta controls roughly 18% of the global digital advertising market, a sector projected to grow over 15% annually through the remainder of the decade, according to Grand View Research. This trend creates a favorable environment for Meta to continue expanding its business.
Over the last five years, Meta’s sales have grown at an annualized rate of 18.3%. Wall Street analysts predict further growth, estimating the company’s revenue will increase by 15.3% annually between 2023 and 2026, offering a promising outlook.
Meta’s strategy centers on growing its vast user base while increasing engagement across its family of apps. The focus remains on monetizing user attention through digital advertising, which currently accounts for 98% of Meta's total sales.
Meta is also doubling down on artificial intelligence (AI) investments. The company plans to spend $37 billion to $40 billion this year on expanding its infrastructure and computing capabilities, with further capital expenditures expected in the coming years.
In a recent earnings statement, the company’s CFO stated that significant capital expenditure growth is anticipated in 2025 as Meta continues its AI research and product development efforts. The goal is to make Meta even more valuable to both users and advertisers by enhancing functionality and improving ad-targeting capabilities.
Financially, Meta is in excellent shape. The company reported a 38% operating margin in Q2 2024, along with $10.9 billion in free cash flow during the quarter. With a robust balance sheet and a net cash position of approximately $40 billion, Meta is well-positioned to maintain its aggressive growth strategy.
Since the beginning of 2023, Meta's stock has surged by 317%, fueled by strong financial results and improved market sentiment. Currently, shares trade at a price-to-earnings (P/E) ratio of 25.6, a significant jump from the multiple of less than 10 just 22 months ago. The market has once again recognized the value of the business.
Potential investors may question whether the current valuation suggests the stock is overpriced. While Meta trades at a premium compared to the overall S&P 500 and is slightly more expensive than Alphabet, another leader in digital advertising, the current P/E still appears attractive. Given Meta’s strong growth trends and its solid financial standing, the business remains highly appealing.
Additionally, Meta boasts one of the widest economic moats globally, reinforced by its powerful network effects. With nearly 3.3 billion daily active users across its social media platforms, the company has created a formidable ecosystem that makes it extremely difficult for competitors to reach this scale. Users continue to engage with Meta's apps because their entire network is already there, and this dominant position is unlikely to shift anytime soon.
Even after the recent stock surge, Meta continues to present a promising investment opportunity.
As long as the price is above 490.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 504.24
- Take Profit 1: 520.00
- Take Profit 2: 540.00
Alternative scenario:
If the level of 490.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 490.00
- Take Profit 1: 480.00
- Take Profit 2: 465.00
