Meta Platforms ‘ savvy use of artificial intelligence and untapped potential in business messaging are reasons why we see more upside ahead for the stock in 2024. Meta reached a 52-week high of $361.90 per share on the second to last trading day of 2023. The stock nearly tripled last year and was the second-best performing Club stock behind Nvidia . META 1Y mountain Meta Platforms 1-year Like most tech stocks, Meta pulled back to start 2024, which is understandable given last year’s incredible rally, which started after CEO Mark Zuckerberg ushered in a year of efficiency. Multiple rounds of layoffs and cost-control efforts in 2023, alongside a recovering digital advertising market, boosted revenue and profit. While still dabbling in the metaverse, Meta has become hyper-focused on implementing AI to optimize ad creation and impressions as well as the delivery of contextual content on Facebook and Instagram — especially on the company’s answer to short-form TikTok videos, Reels, which spans both social media platforms. Here’s a timeline of Meta’s stock performance around earnings in 2023. After the bell on Feb. 1, Meta reported fourth-quarter 2022 earnings. Zuckerberg kicked off his year of efficiency. Meta shares surged nearly 24% the next day. On April 26, the tech giant reported after-the-close a strong first quarter 2023, achieving efficiency gains by optimizing costs while still investing in AI. Meta soared nearly 14% on the news. After the bell on July 26, the company had a stellar second quarter , showing investors how its use of AI led to higher user engagement and better ad performance — and most notably, helped it navigate Apple’s privacy changes for apps. Meta jumped nearly 4.5% in each of the next two sessions. On Oct. 25, Meta yet again delivered a strong third quarter , continuing cost optimization efforts and solid advertising sales. But when management issued conservative fourth-quarter revenue guidance due to macro uncertainties, the stock dropped more than 3.5% on the news. There was a sell-off in the Magnificent Seven stocks in October that coincided with Meta’s third-quarter report. During that time, Jim Cramer had suggested that investors could buy on weakness. In November, the size of our Meta position reached an almost 5% weighting in our portfolio. That’s when we executed our discipline and sold 60 shares , which at the time brought the weighting down to about 4%. We aim to own 30-plus stocks at any given time and try not to exceed a 5% to 6% weighting in any one position. Currently, Meta has a 3.7% weighting. A major catalyst supporting Meta’s growth this year is its investments in generative AI. In a research note last month, UBS said Reels and its updated algorithms “can drive sustained engagement growth for the next several years.” Outside of AI, Meta continues to grow its successful business messaging across its services. Meta offers messaging tools on Facebook for businesses to connect with their customers by highlighting products and services with a business profile. Business messaging is the “next major pillar of our business,” Zuckerberg said during Meta’s post-Q3 earnings call. It offers a “big opportunity on monetization,” he added. We’re also optimistic that advertising can continue its strength in 2024. While management noted softer ad spending at the beginning of Q4 due to the Israeli-Hamas war, Reels is doing a great job at ramping monetization and challenging competitors. Given that TikTok’s Chinese owner ByteDance is facing backlash from U.S. officials, a potential TikTok ban in the U.S. would be a major catalyst for Meta stock. To be sure, heading into 2024, we already know Meta will continue to accumulate billions worth of losses from Reality Labs, its business that makes virtual reality and augmented reality hardware and software. Zuckerberg is making a big bet on Meta’s Quest Pro headset, a competitor to Apple ‘s upcoming Vision Pro. We hope to see this money-losing metaverse operation turn into a winner that gains mainstream appeal. The company also said it anticipates higher infrastructure, operating costs, and payroll expenses in 2024. But if the tech giant continues to deliver on its strengths and the higher expenses don’t threaten margins, we will continue to be believers in the stock. (Jim Cramer’s Charitable Trust is long META, NVDA, AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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A logo of Meta Platforms Inc. is seen at its booth at the Viva Technology conference dedicated to innovation and startups, at Porte de Versailles exhibition center in Paris, June 17, 2022.
Benoit Tessier | Reuters
Meta Platforms‘ savvy use of artificial intelligence and untapped potential in business messaging are reasons why we see more upside ahead for the stock in 2024.
