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In 2021, Meta Platforms (NASDAQ:META) rebranded from Facebook to focus on the burgeoning metaverse. However, the subsequent year brought challenges with the end of pandemic-related benefits and a shift towards fiscal conservatism, leading to a decline in the META stock share price.
Despite fluctuations, Meta Platforms, a top-tier tech stock, appears fairly valued with room for growth. Currently trading 10% below its September 2021 peak, it holds a median price target nearly 15% higher than its current value, suggesting potential long-term success for shareholders.
Let’s take a look at some of the most convincing reasons why investors should take a bet on Meta Platforms this 2024.
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AI Game is Strong
Many investors expect 2024 to be all about artificial intelligence. In this space, META stock has shown its intention to prioritize AI integration across its apps, necessitating new hires and increased capital expenses after lifting a 2023 hiring freeze. Zuckerberg acknowledged the time required for refining experiences, emphasizing AI as the company’s major investment, involving headcount. Plans involved reallocating resources from non-AI projects to sustain improvements.
Llama and Llama 2 gained traction in 2023, with over 100 million downloads and widespread improvements by organizations worldwide. Notably, Jio in India adapted it for their half-billion customers, and HuggingFace’s Open LLM Leaderboard showcased impressive Llama 2 projects among 13,000 variants. The democratization of AI tools, like collaborative image generation and conversational assistants, is transforming accessibility for billions of users globally.
Additionally, the past year indicates a trajectory where AI becomes a primary interface for human-machine interaction. The introduction of Meta’s AI-powered Ray-Ban glasses and the Meta AI assistant showcases a novel approach, blending vision and language understanding to enhance user experiences without the need for conventional devices or apps.
Robust Free Cash Flow
META stock, backed by robust free cash flow (FCF) and impressive 40% FCF margins, may experience a 34% surge to $473 per share. Investors can generate extra income by shorting out-of-the-money (OTM) puts, such as the $325 put option, offering an immediate yield of 1.139%. This trade remains appealing given META’s potential for significant growth driven by its strong FCF and FCF margins.
In the previous quarter, Meta Platforms raked in an impressive $13.64 billion in free cash flow from $34.15 billion in revenue. With 40% of its cash flow remaining after covering all expenses, including capex and working capital changes, it highlights substantial “free” cash flow, especially as the company doesn’t issue dividends.