The post-earnings performance of “Magnificent Seven” stocks has been mixed this earnings season, but it’s safe to say that investors believe that the latest results from Meta Platforms (NASDAQ:META) bode well for the META stock outlook.
As you likely know, shares in the Facebook and Instagram parent bolted by more than 20% higher right after the company’s quarterly earnings release earlier this month. Shares have remained not too far below all-time highs.
Yet while some may believe that the market overreacted to earnings, and that the stock is at risk of topping out, I wouldn’t jump to that conclusion. Taking a look at the latest results/news, it’s clear that this rally was justified.
Taking into account this company’s strong AI catalyst, this stock has much more room to run, both this year, and in the years ahead. Read on, as I explain why.
Meta’s Mega Move Higher: An Appropriate Reaction
Before concluding the market expressed irrational exuberance following Meta’s latest earnings release, consider the details. It’s clear that the results elicited an appropriate reaction among investors.
During Q4 2023, revenue jumped by 25% year-over-year, from $32.2 billion to $40.1 billion. This revenue growth, coupled with a decrease in operating expenses (thanks to Meta’s “year of efficiency” efforts) resulted in a 203% year-over-year jump in earnings per share (or EPS), from $1.76 to $5.33. These results handily beat analyst forecasts.
For Q1 2024, guidance calling for revenue of between $34.5 billion and $37 billion came in well ahead of consensus ($33.9 billion). Alongside strong earnings and guidance, the company also announced it was issuing its first-ever quarterly cash dividend (50 cents per share).
While this dividend won’t result in not that high of a forward dividend yield for shares (0.42%), this move underscores the company’s continued re-prioritization of shareholder interests since 2023, following investor dissatisfaction with some of CEO Mark Zuckerberg’s riskier strategic plans up until late 2022.
What May Drive the Next Bullish Waves
Even if you agree with me that Meta’s rally justified a big jump in the perceived META stock outlook, you may still be concerned that, after an especially strong run post-earnings, META is now entering a period of far less epic price performance.
But while enthusiasm for Meta Platforms has started to fade, and this cooldown could carry in the immediate term, I wouldn’t assume it’s all sideways performance from here for META during between now and year’s end, much less in the years ahead.
At least, based upon this company’s key growth catalyst, which are connected to the generative artificial intelligence boom transforming the tech sector right now.
This “rise of AI” bodes well for Meta, when it comes to its core revenue source (digital advertising). The company is using AI technology to boost revenue generation of its social media platforms. This in turn suggests a strong likelihood that Meta Platforms continues to “crush it” with its quarterly results.
Continued strong results, and further evidence that high growth will carry on, will lead to the next bullish waves for shares.
META Stock Outlook: To $500 Per Share and Beyond
Changing hands for around $475 per share today, a climb to $500 per share is well within sight. A move to even loftier price levels for this stock could come sooner than you think.
Forecasts call for Meta’s earnings to hit nearly $20 per share this year. This gives META a forward price-to-earnings ratio of around 23.75. Given how much AI is having a positive impact on growth, a move to an even higher forward multiple may be possible.
Based on the top end of sell-side forecasts, Meta could experience another dramatic jump in profitability (as much as 47%). While too early to price in this possibility as a near-certainty, based on the current META stock outlook, it’s not too early (or too late) to make this stock a buy at current prices.
META stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
