Opinions
Kim Bolton
Meta Platforms, Inc.
META-Q
BUY
Oct 23, 2024
Stock price when the opinion was issued
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The stock has made a bit of a 'round trip' from its recent highs but considering its strength, market share, financial position and growth, at 23X earnings (with $77B cash) we think it is buyable for investors who can look beyond the current market volatility (which will end, one day).
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META has a dominant market position in social media, its monthly active users exceeds 3 billion, and it is investing in AI. It is a cash flow machine, generating $52B in free cash flow over the past 12 months, it has grown sales by 19% over the past 12 months, and earnings growth is 47% over the past 12 months. It is currently priced at 23.7X forward earnings, which for a company rapidly growing sales and earnings, we feel is fairly cheap, although it can be cyclical depending on enterprise ad budgets.
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He has been buying tech during this dip, in April particularly. We will eventually exit this volatility and find stability and confidence in the market again. Meta and Microsoft are some of his key holdings, and they affirmed their capex guidance--they are spending to make incredible investments over the next three years, because they know AI is the biggest super-cycle every in technology. There is incredible pent-up demand for AI from businesses and consumers. The CEO of MSFT reported that his company processed 50 trillion tokens last month alone, or 3.5 million years of AI conversation.
Reports next week. He has a pretty full position at about 7%. He'd even start a position here around $571, and add around the lower $550 range, and $525. Very good support around $520. His 12-month price target is $645. Thinks it has the biggest database of all the players out there. That's why it buys about $38-39B worth of NVDA chips, to process all that data.
Its natural processing language model, Llama, will sell the processing of its (and others') data to software companies such as NOW and CRM. That's how it's going to monetize all that data. Thinks this stage will happen in 2025.