The integration of AI applications played a significant role in the Meta Platforms (NASDAQ:META) stock performance this year by helping Meta better monetize its Facebook and Instagram platforms. This, along with cost reductions and increased digital ad demand, resulted in stronger results this year. These in turn have resulted in a nearly 168% run-up in price for shares.
The company may be able to capitalize on the rise of AI to a greater extent than currently perceived. Let’s dive in, to both see what I mean, and what this factor could mean for META’s stock price performance going forward.
META Stock, AI Spoils, and the Launch of Imagine
Right now, first-movers in the generative AI space, like ChatGPT developer OpenAI, or its strategic partner, Microsoft (NASDAQ:MSFT) are considered the companies that stand to gain the most from the adoption and monetization of this technology.
I remain very bullish on MSFT stock, for the strong potential for this AI catalyst to turbocharge growth. However, that’s not to say that the proliferation of AI software applications result in a “winner take all” situation, with OpenAI and Microsoft taking all of the spoils. Other top tech companies are well-positioned to capitalize greatly on this technological breakthrough.
When I say “other top tech companies,” Google parent Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) may be what first comes to mind. Yet based on some recent news, there’s even more reason to be confident in Meta’s ability to achieve levels on AI-related growth on par with its “Magnificent Seven” peers.
I’m talking about, of course, the launch of Imagine, Meta’s standalone AI image generator. While the latest among a spate of new AI products launched by the company in recent months, the fact Meta launched it as a standalone product may suggest plans to develop a new major revenue stream.
Further Fuel for the Fire
In my last article on META stock, I argued why, despite rising concerns about a slowdown or reversal for shares, this top-performing tech name remained well-positioned to keep performing strongly in 2024.
I based my view mainly on the fact that, thanks to its current AI monetization efforts, plus the company’s continued development of its AR/VR hardware business, pointed to a strong chance of Meta Platforms meeting, or even beating, present sell-side earnings growth forecasts, which call for META’s earnings to rise 22% next year.
However, depending on how quickly the company monetizes standalone AI applications like Imagine, the chances of an earnings beat could be growing. Even if it takes several years before monetization of standalone AI applications (possibly) become a contributor to Meta’s bottom-line, a move into this area could provide further fuel for the fire when it comes to multi-year growth.
That is, these products could help Meta sustain earnings growth that’s even greater than currently anticipated. Stronger-than-expected growth would keep the stock on an upward trajectory, with shares rising both on increased earnings, as well as due to re-rating of its forward multiple to the upside.
The Takeaway
Skepticism about Meta’s ability to sustain current prices keeps growing. Take another look at recent commentary. You’ll still find plenty of analysts and pundits arguing why a big reversal lies ahead for META in 2024.
Those bearish on the stock are free to hold their opinion. That said the bull case continues to strengthen. Sure, much of the company’s operational improvements came from “one and done” events, like the above-mentioned cost cuts and digital ad market rebound.
Again, though, Meta’s AI efforts point to not only increased monetization of its existing business, but the development of a new standalone AI software business as well.
With this, count on the bull case prevailing, the bear case will fizzle out.
Ahead of this happening, consider now an opportune time to lock down a META stock position.
META stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in META and 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.