Is it too late to buy Meta Platforms stock?

Meta platforms (META 0.30%) the stock has been in good form in the market over the past year, posting solid gains of 74% as of this writing and outperforming the tech-laden performance. Nasdaq-100 Technology Sector index gains of 22% by a healthy margin. The social media giant’s impressive earnings can be attributed to robust revenue and earnings growth in recent quarters.

Meta appears to be gaining ground in the lucrative digital advertising space due to its focus on integrating advanced tools such as artificial intelligence (AI) to help drive stronger returns for advertisers. But what if you’re one of those investors who missed the meta train? Will it be a good idea to buy this tech stock now in anticipation of further gains? Let’s find out.

Analysts do not expect Meta Platforms stock to generate huge gains in the coming year

According to 68 analysts covering Meta, the stock has a 12-month median price target of $575, indicating gains of just 9% from current levels. It is worth noting that 85% of analysts rate Meta’s stock as a buy, and the Street-high price target of $660 points to a 25% upside in the stock price.

However, a closer look at Meta’s prospects and the rate at which it has grown will tell us that it could easily beat Wall Street’s expectations. The company’s revenue for the first six months of 2024 rose nearly 25% year over year to $75.5 billion. Even better, Meta’s adjusted earnings during the period rose 90% year-over-year to $9.86 per share.

Analysts expect Meta to end 2024 with a 20% increase in revenue to $161.6 billion. However, the company’s growth rate in the first half of the year suggests it is on track to surpass that level. More importantly, the pace at which Meta is growing clearly tells us that the company has a larger share of the digital advertising market.

According to eMarketer, digital ad spending is expected to grow 12.2% in 2024, up slightly from last year’s 12% growth. Meta’s 16% revenue growth in 2023 suggests that it outperformed the digital ad industry last year as well, and the trend continued in 2024. The company delivered more ad impressions through its family of apps, and the upside is that advertisers are spending more a lot of money on its platform.

For example, in the second quarter of 2024, the number of ad impressions in the Meta family of apps increased by 10% compared to the same period last year. There was a similar increase in average cost per ad, which explains why the company reported robust growth in its top and bottom line. The reason why advertisers are willing to spend more money on the Meta platform is that its AI tools help in getting a higher return on investment.

Almost all of the company’s advertising clients use at least one of its AI Advantage+ suite of advertising tools so they can improve audience targeting and ad placement. More importantly, a survey by Meta of over 1 million US advertisers revealed that there was a 12% increase in return on ad spend on the company’s platform from 2022.

The company’s focus on providing AI-recommended content for users and enabling businesses to talk to their customers using AI is likely to unlock more growth opportunity in the future and help support its impressive growth. After all, AI adoption in the digital advertising market is expected to grow at an annual rate of 31% through 2027, and Meta is doing the right thing by increasingly adopting this technology so it can stay ahead curves in digital advertising. space-bar.

Investors should also note that the digital advertising market is projected to witness double-digit growth rates over the next two years, growing by 11.4% in 2025 and 10.4% in 2026. The growth estimates of The meta for the next two years indicates that it is to be expected. to continue to grow at a faster rate than the digital advertising space.

META revenue estimates for current fiscal year data by YCharts

The rating is too attractive to ignore

Although Meta Platforms stock has seen impressive gains over the past year, it still trades at an attractive 26 times earnings, which is a discount to the US tech sector’s average price-to-earnings ratio of 44. The forward earnings multiple is also bigger. attractive at 22, indicating stronger performance.

As the chart indicates, Meta’s earnings per share are expected to grow at healthy double-digit rates over the next two years.

META EPS estimates for current fiscal year data by YCharts

Assuming the company’s earnings do grow to $27.97 per share after a few years and continue to trade at 26 times earnings at that point, its stock price could reach $727. This would be a 38% increase from current levels.

However, don’t be surprised to see this tech stock deliver stronger earnings as the market may reward it with a stronger earnings multiple due to its stronger growth, which is why investors who haven’t bought Meta platforms yet should consider doing so before. it’s too late