After an epic rally and nearly 200% gains in 2023, it may be hard to believe Metaplatforms (META 1.95%) has been all but abandoned by Wall Street in 2022. As we enter 2024, stock prices for the parent company of Facebook, Instagram, WhatsApp and the Quest virtual reality (VR) headsets are almost back to the all-time highs reached during the pandemic.
Contrary to popular belief, Meta is much more than a social media company, nor is it solely banking on the Metaverse as its future (despite what the company name change a few years ago might have suggested). At its core, Meta has a massive global data center network that enables millions of companies – especially small businesses – to reach target audiences. Don't forget the possibility that Meta could have another great run in 2024.
2024 could see a further increase in digital advertising activity
Meta is coming off CEO Mark Zuckerberg's “year of efficiency,” during which the company pledged to keep spending under control after a pandemic-era spending spree. More on that in a bit, because a key to Meta stock's continued success in 2024 will be a resurgence in digital ad spending.
When the company reports fourth-quarter 2023 results on February 1, expect strong revenue growth to be in the spotlight. Management forecast revenue of $36.5 billion to $40 billion, up up to 24% from the fourth quarter of 2022. Meta is still seeing poor results in 2022 due to a decline in user activity during the pandemic and resulting digital spending on its apps, as well as the impact of AppleMeta's privacy changes limit Meta's ability to monetize ads on the other tech giant's devices.
Additionally, other companies involved in the digital advertising ecosystem such as: Adobe And ForeclosureBoth of which help with marketing analysis and ad distribution, said Black Friday, Cyber Monday and holiday shopping in general hit new records in the final weeks of 2023. The two software giants reported mid- to high-single-digit percentage increases in spending from online shoppers compared to 2022.
Meta powers the brand marketing of businesses around the world due to the incredible reach it provides with over 3.1 billion daily active users as of Q3 2023. Early indicators of strong consumer spending could mean big things for the social media company, which uses its data centers and new artificial intelligence (AI) algorithms to help marketers find audiences and make sales.
Part two of the “Year of Efficiency”?
Zuckerberg and the company have indicated that they are excited about renewed success in 2023 and that the new ways of operating will continue into 2024 and beyond. This means not only sales growth, but also more profitable sales growth.
Cost savings coupled with Meta's share buyback program have already worked wonders. Earnings per share (EPS) were $4.39 in the third quarter of 2023 – a massive 168% increase over the same quarter in 2022 and a 36% increase over the third quarter of 2021 (the EPS peak of the pandemic ).
Image source: Meta.
A similar increase in earnings per share is expected for the fourth quarter and could potentially continue into the new year. Even though Meta is an expensive-looking stock on a backward-looking basis (31 times trailing 12-month EPS and 25 times trailing-12-month free cash flow), shares could actually represent value on a forward-looking basis (20 times early Wall Street analysts estimate for 2024 earnings per share and 21 times 2024 free cash flow estimate).
It doesn't look like it's too late to invest in meta stocks for the long term. The company is back on track and focused on profitable growth, and its data centers and AI are unlocking healthy returns for marketing clients. Meta could be another standout winner in 2024.
Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool's board of directors. Nicholas Rossolillo and his clients hold positions at Apple, Meta Platforms and Salesforce. The Motley Fool has positions in and recommends Adobe, Apple, Meta Platforms, and Salesforce. The Motley Fool recommends the following options: long January 2024 $420 calls on Adobe and short January 2024 calls worth $430 on Adobe. The Motley Fool has a disclosure policy.