5 Compelling Reasons to Consider Meta Platforms for Your Stock Portfolio

The tech giant, Meta Platforms, had some encouraging developments to share with its investors in a recently released earnings report. Despite facing a decline in share price due to expected sales growth slowdowns and heightened spending on AI investments, the news wasn't all concerning. In fact, the report contained significant positive highlights that could make Meta Platforms an attractive investment opportunity.

1. User Growth Remains Strong

Meta Platforms continues to experience robust growth in its user base. Its daily active users have increased by 7%, reaching 3.24 billion from the previous 3.19 billion, marking a significant uptrend. "We're witnessing strong momentum within our app family," the company stated, which is a fundamental driver for revenue growth in the advertisement-centric business, having surged 27% year-over-year in Q1, totaling $36.5 billion in sales.

2. Advertising Sales Achieve Better Balance

The company has improved the balance in advertising sales by achieving a 20% increase in ad impressions. Although such rates may not continue indefinitely, a 6% rise in ad prices complemented this, a figure that demonstrates enhancement from the previous quarter's 2%. This balance suggests that Meta could increasingly rely on higher ad rates rather than just ad impression volume over time.

3. Efficiency is on the Rise

Despite Wall Street's concern over elevated spending projections for the AI sector into 2024 and 2025, Meta enters this period with strong financial vigor. Operating margin rose to 38% from the previous year's 25%, as expense growth, at 6%, lagged behind revenue growth. Operating earnings saw an astonishing near-double jump to $14 billion. "Our focus on cost-discipline remains, even as we invest in AI and Reality Labs," assured CFO Susan Li.

4. Commitment to Shareholder Returns

Meta isn't just about retaining profits but also about rewarding shareholders with cash. The company has initiated dividend payments and is actively repurchasing shares, with $1.3 billion in dividends and $15 billion in share buybacks last quarter. These actions signify a direct financial return to investors and demonstrate Meta's capability to generate substantial free cash flow, which stood at over $12.5 billion for the period.

5. Financial Capacity to Support Future Investments

Meta has ambitious plans, particularly in the AI domain, which requires significant capital. Reality Labs, for example, faced a $4 billion loss, yet these hefty investments into prospective growth avenues shouldn't deter investors. Despite such spendings, Meta Platforms is equipped to sustain strong returns while nurturing its growth initiatives, positioning it as a potentially lucrative long-term investment despite a recent 10% stock price drop from its peak.

growth, efficiency, investment