It’s no surprise that most investors desire high returns from the stocks they add to their portfolios. The best situation, to be more specific, is to find a business that is more exitable S&P 500a widely followed benchmark.
This is correct Meta forums(NASDAQ: META ) He did, and then some. In the year Shares are up an impressive 178% since January 2020. That market-beating return will surely draw the cheers of the investment community.
However, investors are concerned about the future. This can’t stop.”Amazing sevenDo the stock double in the next five years?
Meta’s position in the Internet sector is supported by some notable features that make it clear how advanced the company is. Investors don’t struggle to find the obvious. Economic environment. In a meta state, it has very powerful networking effects.
This is true when you look closely at the app family, which includes Facebook, Instagram, WhatsApp, Messenger and Threads, which accounted for 99% of total revenue by the third quarter of 2024.
When a product or service evolves with multiple users and uses, network effects can result. Meta counts 3.29 billion daily active users on its social media apps. People want to use them because everyone they know uses them and there are an unlimited number of connections that can be made.
This makes it impossible for anyone to disrupt the meta industry space. Of course, any well-funded tech entrepreneur can launch a new social media app. But getting people and businesses to sign up and start participating more can be an impossible task.
Another remarkable quality is the meta’s incredible profitability. In the third quarter, it posted net income of $15.7 billion on sales of $40.6 billion. Free cash flow It fuels division and re-shares purchases. This increases investor returns.
Most impressive is the company’s operating margin in 2016. That’s how it went from 25% in 2022 to 43% in the third quarter of 2024. Despite significant cost controls, revenue still increased 47% between the third quarter of 2022 and the third quarter of 2024. I assure you that Meta has high earning power.
It’s easy to be optimistic about the company’s growth prospects, even with revenues of $156 billion after 12 months. The consensus among Wall Street analysts is that sales and revenue will increase by 13.7% and 12.9% annually between 2024 and 2026, respectively.
Given the historical trajectory of the business, it is not unreasonable to expect this double-digit pace to continue through the end of this decade. This is because the global digital advertising market is poised for strong growth. And Meta can deliver more ad impressions at higher average prices per ad. That’s what happened in the third quarter.
Meta plans to have significant capital spending growth through 2025, Chief Financial Officer Susan Lee said. That compares to $37 billion to $40 billion last year.
Most of these include investments aimed at strengthening the company’s network infrastructure The aspirations of artificial intelligence. This could add further growth potential — Meta isn’t resting on its laurels and aims to be at the forefront of what many industry executives believe is the next game-changing technology.
Meta was the winner last time. But still shares Today it trades at a reasonable price-to-earnings ratio (P/E) of 24.2. In comparison, the technology is difficult Nasdaq-100 IndexThe P/E multiple of 25.1 is above average.
It’s hard to fathom why Meta shares still trade at such a compelling price, especially when compared to many of its Magnificent Seven peers, and despite the company’s stellar financial performance over the past several quarters. But this gives an opportunity to investors.
Given the prospect of strong dividend growth, combined with reasonable valuations, I wouldn’t be surprised to see Meta stock double between now and 2030.
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Randy Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the Motley Fool’s board of directors. Neil Patel And the customers have no place in the said shares. The Motley Fool has a spot on and recommends meta platforms. The Motley Fool has Disclosure Policy.
