Don’t Fear Meta’s Fivefold Surge, The Best Is Yet to Come — TradingView News

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    As of this writing, Meta Platform meta The stock price is approaching the $500 per share level. As a result, META stock has experienced a more than five-fold jump from its 2022 lows.

    Outperformed 7 similar Magnificent stocks during this period: Apple AAPLand alphabet googlethe parent company of Google and YouTube.

    That said, many may view this level of outperformance as concerning. On the surface, it makes sense. It is common for stock prices to soar, but the results do not meet expectations, with the stock price correcting significantly beyond investors' expectations.

    Fortunately, that doesn't seem to be the case with Metaplatform. Here's why:

    META stock: Too far, too fast? Not so fast!

    Few would argue that the massive increase in Metaplatform's price during 2023 was completely justified.

    Early last year, META was trading at what some would consider a price-to-earnings ratio in value stock territory (14 times trailing 12-month earnings).

    There were also concerns that CEO Mark Zuckerberg would continue to make big bets on the Metaverse at the expense of profitability.

    But as the year ended, that wasn't the case. Mr. Zuckerberg has designated 2023 as the “year of efficiency.” The company cut jobs, cut expenses, scrapped its ambitious Metaverse plans, and refocused on the true next technological frontier: generative AI.

    These efforts, along with a recovery in digital advertising demand, led to a significant increase in the price of META stock. This was both parallel to revenue growth and a significant rerating of the stock (to a valuation of 23.7 times expected earnings).

    While most agree that the big rally in 2023 made sense, some are skeptical about META's nearly 40% jump since the start of 2024. However, I would like to say, “Is it too fast?” Not so fast! At a minimum, it is based on the following factors:

    What justifies (and sustains) the 2024 rally?

    Based on the stock price chart, investors appear to be buying META stock blindly (whether out of “AI mania”, FOMO, or simply following a trend) with little regard for valuation or fundamentals. You may see it. Still, before you jump to such a conclusion, consider the following:

    Yes, at current prices, Meta Platforms is currently trading at approximately 33 times TTM earnings ($14.87 per share). However, META's valuation appears to be much more reasonable based on sell-side projections. Consensus estimates for 2024 are for earnings per share of approximately $20, representing an increase of 34.5%.

    Consensus is for earnings growth of 15.7% during 2025, and at the high end of forecasts, Meta Platform's revenue is expected to grow approximately 46.8%. Granted, predictions aren't foolproof, but the analyst community didn't come up with these numbers randomly. These analysts consider many catalysts.

    For example, the company's AI technology and virtual reality hardware catalyst, which we discussed in a previous META article.

    In addition to this, Meta may further utilize its self-developed AI platform to continue to enhance the monetization of its social media platforms and launch new products/services.

    Verdict: Still Outstanding, Still a Strong Buy

    For Apple and Alphabet, leveraging AI is still largely “in progress.”

    Meta Platforms is already (and will continue to) capitalize on the generative AI trend. As a result, the stock could continue to trade at a valuation premium to both AAPL and GOOG.

    Even if META cannot benefit from multiple further expansions, just maintaining its current valuation could result in significant returns for investors, assuming its performance matches the projections above.

    Over the next few years, a stock price level that looks expensive today ($500 per share) could look downright cheap in hindsight.

    With this in mind, don't let the recent rally scare you away from your existing META stock position. If you have not entered a position yet, please do not hesitate to purchase this “Mag 7”.

    META stock earns an A rating on Portfolio Grader.

    On the date of publication, neither Louis Navellier nor the InvestorPlace research staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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