These AI-powered stocks have the potential to deliver significant returns over the long term.
The US consumer price index (CPI), an indicator that measures inflation, rose 3.5% in March compared to the same month last year. Investors and analysts are wary of inflation accelerating again after CPI growth exceeded expectations for the third consecutive month. This trend could prevent the Federal Reserve from cutting interest rates and could cause a significant correction in the stock market.
Although investors are currently wary of the overall economic outlook, there is potential to make money in the market in the long run. Certain growth stocks, especially those powered by AI, may prove resilient, primarily due to their large addressable markets and solid business models.
The reason is as follows meta platform (meta -4.13%) and roblox (RBLX -0.59%) Meets the standards.
meta platform
Meta Platforms, the owner of very famous social media platforms such as Facebook, Instagram, and WhatsApp, is a dominant force in the digital advertising industry. The company’s stock price has risen 40% year-to-date in 2024 on the back of solid user engagement metrics, an effective monetization strategy, and improved operational efficiency over the past few quarters. However, there are still several reasons to buy this stock ahead of the company’s first quarter 2024 earnings report (scheduled for April 24, 2024).
First, Meta is estimated to have a solid 20% share of US digital ad spending and a 75% share of US social network ad spending in 2024. Moreover, the company’s monthly active users reached 3.98 million at the end of 2023. That’s almost half of the world’s population. The company’s wide reach and scale have made its social media platform essential to the majority of prominent advertisers.
Second, the daily use and engagement of meth among young people is increasing in the United States. This is a very lucrative trend. Advertisers want to reach this demographic because meta has a high lifetime value. Meta advertisers stand to benefit from the increased lifetime purchasing power of these younger users.
Third, Meta leverages advanced AI models to improve and personalize content recommendations, thereby driving engagement with short-form video content (Reels). The company also uses his AI-powered Advantage+ suite to improve ad targeting and performance. It helps advertisers optimize and automate part or all of their ad campaign creation, placement, and audience. Meta is also working to integrate AI-powered recommendation systems across the video ecosystem to generate more relevant and responsive content for users. All these efforts are expected to improve advertising conversion rates on Meta’s social media platforms.
Finally, analysts also expect strong first-quarter results for Meta. Sales are expected to increase 26% year-on-year to $36.1 billion, and EPS (earnings per share) is expected to increase 95% year-on-year to $4.29.
Given the many solid tailwinds and solid financials, Meta seems like a smart choice at the moment.
roblox
Game company Roblox’s stock price is down nearly 20% so far in 2024. Unsurprisingly, the company isn’t a popular AI stock right now. However, it’s important to note that the company’s advances in creating interactive and immersive gaming experiences place it at the forefront of the rapidly evolving opportunities of the metaverse. Grand View Research predicts that the Metaverse opportunity will increase annually at a compound average growth rate (CAGR) of 41.6%, from $82 billion in 2023 to $936.6 billion in 2030. I am.
Roblox ended 2023 with a daily active user (DAU) base of 71.5 million, of which 15.9 million were paying users. This growth has been particularly noticeable in his 13+ age group, which now accounts for nearly 58% of his DAU base in the company. This trend is promising, as older users are more profitable and more attractive to the company’s nascent advertising business. The availability of his Roblox on PlayStation and Meta Quest platforms is expected to further increase the size and engagement of its user base. Access to multiple platforms plays a key role in allowing businesses to expand their user base.
Roblox bookings also increased 25% year-over-year to $1.1 billion, growing much faster than two fixed costs: compensation and infrastructure expenses in the fourth quarter (ending December 31, 2023) . This shows that the company is successfully monetizing its user base while controlling costs.
Roblox derives the majority of its revenue from in-game purchases, but is now starting to focus on advertising opportunities. The advertising business is currently in its early stages, but 69 brands joined the platform in the fourth quarter. The company is preparing to expand its advertising business in 2024 by building a direct sales force and developing advertising performance measurement capabilities.
Roblox is not yet profitable. However, the company’s stock is currently trading at his 8x trailing 12-month sales, well below his historical average of 14.45x. With an established user base, multiple monetization avenues, and the potential to capture a significant share of the Metaverse market, his Roblox appears to be an attractive choice, especially at its current relatively low valuation level.
Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Manali Pradhan has no position in any stocks mentioned. The Motley Fool has a position in and recommends MetaPlatform and his Roblox. The Motley Fool has a disclosure policy.
