Following last month’s post-earnings plunge Meta Platforms (NASDAQ:META) has stabilized, but the question on everyone’s mind is when Meta Platforms stock gets back into rally mode.
Unfortunately, a full-on return to an upward trajectory may take some time for shares in the Facebook and Instagram parent. Much like with other top “Mag 7″ stocks, investors are once again digesting macro-related issues like high interest rates, and the possibility of an economic slowdown.
Also, it’s also possible that investors now believe that, after soaring more than fivefold off its late-2022 lows, META is now fully priced. However, if the economy stays strong despite high interest rates, concerns about the macro picture could fade yet another time.
Not only that, in company-specific factors, Meta’s potential to level-up on its success thus far capitalizing on the generative AI growth trend is something else that could drive another megawave for shares.
Meta Platforms Stock and the Latest AI News
Meta’s initial gen AI success has come from integrating the technology into Facebook and Instagram. This integration has enhanced monetization of these popular, ad-supported platforms. However, investors are clearly not as confident about Meta’s move to raise the stakes with its AI wager.
At least, that’s the impression we got from how the market bailed on META stock, after the company announced plans to spend billions more than previously anticipated to build out its AI infrastructure. Check out recent AI-related headlines for Meta Platforms. The company isn’t wasting money.
For instance, Meta has been reportedly looking to form deals with media publishers, for access to content for use in training its large-language models. The company may also be making progress with its move into AI video generation software.
Even as it’s too early to tell whether these and similar endeavors will ultimately add to the top and bottom-line, it’s certainly a step in the right direction.
More importantly, Meta’s growing focus on areas that will likely result in product-based monetization could lead to the market having an even more favorable opinion about the stock.
The Path to High Growth and a Higher Multiple
Yes, it’s for now far from a lock that Meta’s big bet on AI pays off as intended. It’s perfectly fine for the market to have its doubts. However, just because the company is ramping up AI spending, doesn’t mean that earnings for Meta Platforms stock are about to take a serious hit.
Steady growth from the company’s legacy businesses is likely to continue. Again, AI integration is improving how much money Meta generates from the number of eyeballs scrolling through Facebook and Instagram each day.
With this, it makes sense that sell-side forecasts, even after accounting for the increased AI spend, anticipate earnings growth of around 14.2% in 2025.
Even before new AI products begin to boost the bottom-line, the market could begin to price them in. How so?
META may be up substantially over the past few years, but the stock, at 23.3 times forward earnings, still trades at a big discount to AI plays with subscription-based revenue models, like Microsoft (NASDAQ:MSFT). MSFT trades for 36.1 times forward earnings.
While stopping short of saying that META should sport a similar multiple of MSFT, moving away from having an exclusively ad-driven revenue model could do wonders for valuation.
With $600 Well-Within Reach, Don’t Sleep on META
Forget about Meta Platforms shares having just a path to $500 per share. Hitting $600 per share sooner rather than later is well within reach. Once again, due to both the prospect of further earnings growth, plus the potential for the market to rerate META to a higher multiple.
On an even longer time frame, additional mega moves higher are very possible. Think $750, or maybe even $1,000 per share. That said, before Meta Platforms comes even close to reaching such heights, shares could continue to tread water at present price levels.
With this in mind, don’t sleep on this opportunity. Feel free to invest in Meta Platforms stock.
Meta Platforms 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.
