In a strategic move in late 2021, Meta Platforms (NASDAQ:META) stock wobbled as Facebook embraced the metaverse concept by changing its name and business model altogether. This rebrand coincided poorly with the market’s anticipation of rising interest rates, causing skepticism about the decision’s timing and wisdom.
Meta Platforms has become a top player in virtual reality and augmented reality with investments in Oculus VR and other ventures. However, the recent surge in META stock has been driven by sales growth and cost-cutting, as well as a 7% rise in daily active users and increased ad sales. With sustained momentum, META stock remains an interesting choice for those seeking growth in this increasingly uncertain environment.
Meta Stock and Amazon
Meta recently partnered with Amazon (NASDAQ:AMZN) to streamline shopping for users, a collaboration I think is worth focusing on. People can connect Facebook and Instagram accounts to Amazon to shop directly through ads on social media feeds without leaving Meta’s platforms. The onetime link setup enhances the shopping and purchase experience.
An Amazon spokesperson revealed customers can now shop Amazon’s Facebook and Instagram ads and complete the purchase on Amazon without leaving the social media apps. Meta’s return to live shopping comes after successful 2024 ad revenue growth, powered by AI investments. This move suggests Meta’s commitment to enhancing user experience and retailer engagement.
Maurice Rahmey, co-CEO of Disruptive Digital, leaked news of Meta’s e-commerce deal in a LinkedIn post. Rahmey sees it as a valuable chance for advertisers, solving issues caused by Apple’s App Tracking Transparency policy. Stay tuned for PMW’s in-depth analysis later this week, featuring expert perspectives from various industry sources.
AI Video Editing Tool by Meta
On Thursday, Meta Platforms introduced two AI-driven video editing features, designed for sharing on Instagram or Facebook. Emu Video produces four-second videos based on prompts like captions or images, while Emu Edit facilitates easy video modification using text prompts. These tools are an evolution of the Emu model, originally designed to generate images based on text input.
Emu enables users to edit a photo’s style or background. Over the past year, businesses embraced the growing generative AI market, driven by advancements like OpenAI’s ChatGPT. Meta Platforms has become a significant player in the competitive AI landscape, challenging major counterparts such as Amazon, Microsoft, and Google.
Strong Q3 Earnings
Meta’s revenue comes from two segments: the “family of apps” and “Reality Labs.” Ad sales on social platforms like Facebook contribute the majority, about 98% to 99%, while Reality Labs focuses on hardware devices, including VR headsets. In Q3, advertising revenue grew 23%, a notable increase compared to Q1 (4%) and Q2 (12%).
Meta’s growth was partially attributed to integrating generative AI features into its ad services to enhance advertisers’ campaign targeting. Q3’s ARPP of $8.71 is the highest since Q4 2021, with promising early results. With $13.6 billion in free cash flow, Meta reinforces Zuckerberg’s portrayal of a “leaner organization.”
The implementation of artificial intelligence and the monetization of short videos, known as Reels, are poised to incrementally elevate Meta’s revenues next year. While competition adopts similar strategies, Meta intends a gradual Reels monetization to retain users.
As part of the “Magnificent 7” with a robust balance sheet and high profitability, Meta’s shares remain favored on Wall Street, with a persistent expectation of continued gains from robust digital advertising trends in the coming year.
On the date of publication, Chris MacDonald has a LONG position in META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
