META: Liquidity, Growth, and AI Fuel Institutional Appetite

Meta Platforms Company Overview

Zacks Ranks #3 (Hold) stock Meta Platforms (META) is the world’s largest social media platform.With social media powerhouses like Instagram and Facebook under its umbrella, the company is benefiting from increasing ad revenue. Additionally, Meta is working on growing and monetizing WhatsApp, the world’s largest messaging app. More than 3 billion people use Meta’s family of products on a daily basis. Though Meta faces intense competition from Alphabet (GOOGL), Twitter, Amazon (AMZN), and Snap (SNAP), the company continues to gain market share.

Meta: Liquidity + Fast, Consistent Growth = Institutional Appetite

With double-digit EPS and revenue growth, it’s difficult for investors to find a company growing as fast, consistently, and with such liquidity as Meta. Because META enjoys this rare trifecta, institutional investors are likely to remain attracted to this ‘hedge fund hotel.’

Meta Benefits from AI Now and into the Future

Meta Platforms is expected to spend roughly $70 billion in CAPEX in 2025 to boost its AI ambitions. While the spending may seem reckless to Wall Street due to the sheer size, META is already enjoying significant returns on its AI investments, unlike most AI companies. In Meta’s recent earnings conference call, visionary CEO Mark Zuckerberg featured five ways AI will drive META, including:

“Improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices.”

AI is driving increased time spent on its core social media offerings. AI optimization has led to a 5% increase in time spent on Facebook and a 6% increase on Instagram – leading to better returns for Meta’s ad business (which makes up ~97% of revenue). Meanwhile, Zuckerberg made a shocking forward-looking statement that suggests that his company’s AI is the best or near the best, saying:

“Developing superintelligence – which we define as AI that surpasses human intelligence in every way – we think is now in sight.”

META: Post Earnings Drift Set-up

Last week, META blew away Wall Street EPS expectations, marking the company’s eleventh consecutive earnings beat.

Following its earnings beat last week, META shares bolted more than 11% as volume swelled to 220% above the norm. Heavy volume and robust price action of this magnitude signal heavy institutional accumulation among investors. Additionally, because these institutional investors usually buy for weeks and months at a time, I expect META to benefit from being a classic ‘post-earnings drift’ play.

Bottom Line

Meta is one of the rare companies already benefiting from its AI investments. The company is being driven by strong performance across its social media platforms, with consistent growth in both revenue and earnings per share.

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This article originally published on Zacks Investment Research (zacks.com).

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