After Meta Platforms (NASDAQ:META) stock soared 166% so far in 2023 as of Nov. 9, I don’t expect the shares to come close to duplicating that performance over the next 12 months. That’s because the valuation is no longer very cheap, while the current ad rebound is, to a large extent, baked into the shares.
I don’t expect the company’s initiatives to have a meaningful impact on the shares in the next 12 months. Despite that, I think the company will continue to grow significantly and remains popular with investors. I don’t expect the name to outperform the S&P 500 by much. As a result, I view META stock as a fairly good investment for conservative growth investors at this point.
META Stock Is No Longer Very Cheap
In the third quarter, Meta meaningfully benefited from the ad spending rebounding that I had been expecting since the beginning of the year.
Specifically, the company’s top line jumped 23% versus the same period a year earlier, while its net income soared 164% year-over-year to $11.5 billion. The company’s layoffs and its other cost-cutting initiatives during the year that ended in June were likely the biggest factor behind the huge bottom-line increase, so the firm’s profit growth will likely slow a great deal in 2024.
With META stock trading at a trailing price-earnings ratio of 28, the stock’s price-earnings multiple has room to expand by 10% or so, but I would not describe the shares as exceptionally cheap.
No Needle -Moving Initiatives in the Next Year
Meta has been pushing its metaverse and virtual reality initiatives for years now with little to show for them. I see no sign of that dynamic changing soon.
The company’s use of artificial intelligence and the monetization of Reels, its short videos, are likely to boost its revenues by a few percentage points next year. I don’t expect the firm to get a bigger boost than that from those initiatives because many of its competitors in the digital ad space are adopting similar strategies, while Meta is likely to monetize Reels slowly to avoid losing users to other platforms.
Meanwhile, I think Meta’s recently announced a deal with Amazon (NASDAQ:AMZN), which involves users being able to buy products from the e-commerce giant “without leaving the social media apps” might be a game-changer for Meta in the long term. However, given Meta’s lack of success with e-commerce in the past, I’m unsure whether the initiative will ever be a needle mover for META stock. And I would bet against it boosting META stock in 2024.
Meta Is a Street Favorite
Meta is one of the “Magnificent 7,” it has a very strong balance sheet, and it generates high profits. As a result of these points, the shares are beloved by the Street, and that’s unlikely to change anytime soon. Moreover, I expect the company to continue to benefit from very strong digital ad trends over the next year.
As of this writing, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
