It’s a great time to be a shareholder in meta platform (meta -0.43%). After hitting a low around early November 2022, the company’s stock price has soared nearly five times (as of February 20). Investor enthusiasm is on an order of magnitude.
Despite this monster performance, FAANG stocksis trading near all-time highs. forward price earnings ratio It’s currently exactly 23.5. This could prompt you to buy the stock in a hurry.
But first, here are three things you need to know about this dominant tech giant.
Large but growing
Meta Platforms owns and operates some of the most popular social media services on the planet.
The company’s Monthly Active Users (MAUs) across various platforms, including Facebook, Instagram, WhatsApp, Messenger, and Threads, reached a staggering 4 billion at the end of last year. This means that almost half of the world’s 8.1 billion people use their metadigital assets once a month. It’s hard to understand.
While it’s reasonable to think the company won’t expand any further, it’s worth pointing out that MAUs increased 6% year-over-year in the fourth quarter. The markets in the US, Canada and Europe are much more mature, so Meta has seen better growth and success in other regions such as Asia Pacific.
This massive scale provides powerful network effect. The more users a particular social media platform has, the more valuable it is to users. Anyone can start a new app tomorrow, but it will be nearly impossible to scale it like Meta’s service, which protects its competitive edge.
Digital advertising is key
Providing a free service to billions of users naturally means that Meta is a digital advertising powerhouse. Of the $135 billion in revenue it brought in in 2023, 98% came from advertising sales.This will be postponed alphabet It ranks among the top in the world in terms of digital advertising revenue.
Meta is able to extract valuable data from its huge user base, so it’s no wonder that businesses of all sizes find it highly effective to use the company’s platform to target their audiences.Integrations currently underway artificial intelligence (AI) capabilities can only improve this for marketers.
The downside is that the digital advertising market is proving to be somewhat cyclical. When interest rates rise, inflationary pressures persist, consumer spending is squeezed, and everyone is uncertain about where the economy is heading, it’s no surprise that advertising spending is one of the first things executives cut. Meta reported that these headwinds will cause his 2022 revenue to decline by 1%. However, last year the situation improved significantly, and sales increased by 16%.
It also helps that digital ad revenue grew by an impressive 54%. Operating profit margin For families in the app segment in Q4. Add this to Meta’s net cash position of $47 billion, and there should be no concerns about whether the company will be able to weather an unfavorable macro environment.
Meta’s Metaverse Ambitions
Love him or hate him, it’s a credit to Meta’s founder and CEO. mark zuckerberg, for building one of the world’s most valuable and dominant companies in just 20 years. By being a forward-thinking innovator, he constantly strives to position his business for future technological changes.
Zuckerberg thinks the next change could be the next one. metaverse. As a result, he is focusing on developing new hardware and software products in hopes of attracting his 1 billion users to spend time and interact with the virtual world.
He is putting his money where his mouth is. Meta’s Reality Labs unit posted an operating loss of $16 billion in 2023, with further losses expected. Also, the revenue isn’t that great, with combined he has generated $4 billion in revenue over the past two years.
But investors should be suspicious of Mr. Zuckerberg at their own peril, given his proven track record of success and the vast financial resources available from the company’s thriving social media apps.
If you’re looking to pick up shares in Meta, you now understand three very important aspects of the business that could lead to a more informed decision.
Randi Zuckerberg is a former Facebook head of market development and spokesperson, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Neil Patel has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platform. The Motley Fool has a disclosure policy.
