The parent company of Facebook and Instagram Meta Platforms ( META 1.60% ) The company’s stock has seen remarkable growth in its share price in the last year. In August of the previous year, the stock hit a low of $274.38, but by July of the current year, it had surged almost twofold to reach a peak of $542.81.
However, in contrast to numerous technology stocks that are profiting from the enthusiasm surrounding them. AI Meta’s stock price saw a significant increase due to its remarkable performance in digital advertising. The sector experienced growth in 2023 with a 12% rise in spending on digital ads, leading to revenue growth for Meta.
Currently, the company’s stock price has decreased from its peak, in line with the overall drop in the stock market. Is this decrease a chance to buy? Let’s examine Meta to find out.
Meta’s financial stability
Meta benefited significantly from the growth of the digital advertising sector in the past year, as it holds a substantial 18% market share, placing it just behind Google’s parent company. Alphabet The competitor in second place has a market share of 7%.
Meta’s strong presence in the digital advertising market resulted in a 22% increase in revenue in the second quarter compared to the previous year, reaching $39.1 billion. This is just the beginning of Meta’s impressive financial performance in Q2.
The second-quarter balance sheet of the company showed a very robust performance. The total assets amounted to $230.2 billion, while the total liabilities were $73.5 billion.
Moreover, Meta ended the second quarter with a significant amount of cash on hand. The total amount of cash, cash equivalents, and marketable securities stood at $58.1 billion at the end of Q2. free cash flow In the second quarter, Meta had a free cash flow of $10.9 billion, surpassing the $1.3 billion dividend payments, and allowing the company to have a significant amount left over for business investments, debt reduction, and share buybacks.
Thanks to a combination of revenue growth and careful cost management, the company also saw a significant 73% rise in net income to $13.5 billion compared to the previous year. This contributed to Meta’s diluted profit per individual share (EPS) is expected to grow by 73% to reach $5.16 in 2023, up from $2.98.
Meta’s investments in technology
Meta’s Chief Financial Officer, Susan Li, emphasized the significance of managing expenses to support the increase in earnings per share. Li outlined Meta’s strategy of cost control through vigilant management of recruitment, emphasizing the importance of prioritizing effectively to allocate resources towards enhancing infrastructure, particularly to advance the company’s AI objectives.
Her remark regarding the investment in infrastructure reflects Meta’s approach to expanding its business by utilizing both artificial intelligence and technology. the metaverse , the latter being the reason why Meta is called so.
The company’s AI investments are proving to be successful, with CEO Mark Zuckerberg stating that Meta AI digital assistant is expected to be the most widely used AI assistant by the end of the year.
Regarding Meta’s investments in the metaverse, the newest version of their smart glasses incorporates artificial intelligence and has been performing well in sales since its release last year. Zuckerberg mentioned that there is still more demand for the product than they can currently produce.
Even though Meta has achieved success, its goals for the metaverse are still far from generating substantial income. Out of the $39.1 billion generated in sales in the second quarter, 98% was derived from advertising.
Should we purchase Meta stock or not?
Meta is expected to experience growth in the upcoming years. It is anticipated that the increase in digital advertising spending observed in 2023 will persist this year and carry over into the following years.
Currently, the majority of Wall Street analysts recommend buying Meta stock, with a median share price target of $570. This indicates a belief that the stock price has the potential to rise from its current level.
Given the promising future of the digital advertising sector and Meta’s early achievements in AI and the metaverse, it appears that Meta is a valuable investment opportunity. investment for an extended period of time .
