Meta Platforms(NASDAQ: META) is best known for its social media dominance, and for good reason. More than 3.1 billion people use one of the company’s apps every day. From Facebook to Instagram, Whatsapp, and Threads, the company has become an expert when it comes to connecting people.
And this expertise along with recent cost cuts and a focus on efficiency has driven earnings gains. Last year, revenue climbed in the double digits to $134 billion, and net income soared 69% to $39 billion. This is mainly thanks to advertising revenue across the company’s social media platforms.
But Meta’s focus doesn’t stop at social media as we know it today. The company over time has shifted gears to invest in something that could reinforce its social media dominance, ensure advertising revenue growth, and even offer potential for new sources of revenue. I’m talking about artificial intelligence (AI). “AI will be our biggest investment area in 2024,” Meta chief executive officer Mark Zuckerberg said last year. Does this make the stock a buy? Let’s find out.
Image source: Getty Images.
From Llama to Meta AI
Meta isn’t new to the field of AI and has progressively increased its presence in this hot technology. The company has developed the Llama family of large language models (LLMs), conversational assistant Meta AI to be used across apps, and even AI-powered smart glasses.
The company’s goal is to make these and other products an integral part of Meta products and services. For example, one day, all Meta app users will rely on an AI assistant to help them with everything from daily tasks to addressing bigger questions. And every developer possibly could come to Meta for access to a top quality open-source model for building.
Importantly, AI also can help Meta increase the profitability of its family of apps moving forward. Reels — those short videos featuring a cat, a new dance move, or just about anything — use AI to serve them to the right audience. Reels have taken off, with people sharing them 3.5 billion times every day. The more time people spend on platforms like Instagram or Meta’s other apps, the more advertisers will want to catch them there — and that equals growing revenue for Meta.
And speaking of advertisers, Meta also continues to develop and improve tools to help them use AI to gain efficiency and better target their ads. These efforts, too, should keep Meta’s biggest source of revenue coming back and eventually even spending more.
How will Meta stay ahead in AI?
So, how does Meta plan on staying ahead in this competitive field of AI? The company aims to boost its work in AI across many levels, starting with computing power. By the end of the year, Meta aims to have 600,000 graphics processing units (GPUs) of compute, and more than half will be from top GPU maker, Nvidia. These chips, with their ability to conduct multiple tasks simultaneously, power the “deep learning” of AI models, making them critical to AI development.
Meta also continues to champion open-source software infrastructure development, meaning that these platforms, such as LLM Llama, are openly available for use. This doesn’t stop Meta from keeping certain product specificities proprietary — and at the same time, the company can benefit from the input of other experts in the field to help advance the development of AI projects. As Meta notes, open-source software typically offers more security and efficiency — and often becomes the industry standard. So, Meta has a lot to gain over the long run by fostering collaboration instead of operating behind closed doors.
To support general growth as well as AI expansion, Meta has increased the high end of its capital spending forecast for this year by $2 billion — the company now expects to invest $30 billion to $37 billion, primarily in servers and data centers. Meta also plans on hiring in key areas this year to favor AI development now and over the long term.
Is Meta an AI Buy?
Now, let’s get back to our question: Does all of this make Meta a buy? Meta is a social media leader, and that leadership has helped it generate billions of dollars in earnings. An investment in AI is expensive, but Meta has cut costs where needed and boosted efficiency in recent times — so the company has what it takes financially to make this investment. And AI should drive gains in advertising revenue and could lead to other revenue sources down the road.
Even after the stock soared more than 150% over the past year, the shares trade for only 24x forward earnings estimates — dirt cheap for a growth stock.
All of these elements, together, make Meta a top stock to buy today and to hold onto for the long term.
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TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
