Wall St. Cheers AI Bet as Meta Posts Record-Breaking Rally

uk

Meta Platforms Inc (META) has been riding a wave of investor enthusiasm, culminating in a stock performance that marks its longest streak of daily gains in nearly a decade. This surge, which saw the stock rise $2.18 and close above the $689 level on Friday to extend a 10-session winning streak, reflects not just market momentum but a robust confidence in Meta’s strategic pivot towards artificial intelligence (AI). The company’s shares have climbed 13% over this period, setting new records and closing January with a strong 17.71% gain, marking a standout month for Meta’s stock performance.

At the heart of this bullish sentiment is Meta’s aggressive investment in AI, a technology that has become central to its operational strategy. AI is not just enhancing how Meta targets ads or engages users; it’s redefining the company’s future growth narrative. Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, highlighted to Bloomberg the execution quality at Meta and the optimism surrounding AI’s potential to elevate the company’s performance. He suggests that this technology allows for more precise ad targeting, thereby improving the efficacy of Meta’s advertising model, which is crucial for its revenue stream.

Despite a revenue forecast in the current quarter that slightly underwhelmed consensus expectations – revenue is projected to be between $39.5B and $41.8B, reflecting 8%-15% growth y/y-analysts had anticipated slightly higher figures – the market has largely overlooked this due to the confidence in Meta’s AI strategy. Mark Zuckerberg’s prediction of 2025 being a pivotal year for AI underscores this focus. His comments, coupled with the announcement of up to $65 billion in AI-related investments for the year, have been interpreted by Wall Street as a strong vote of confidence in Meta’s direction.

This investment has been juxtaposed with the recent emergence of DeepSeek, a Chinese AI startup with an open-source model akin to Meta’s Llama, providing further validation of Meta’s approach to AI development. Even though there’s scrutiny over the return on such massive AI investments, the market seems to trust Meta’s vision.

Currently trading at 26 times estimated earnings, Meta’s stock valuation is in line with the Nasdaq 100 Index (COMP), suggesting that its price is not out of sync with broader market multiples. However, Pavlik posits that based on current trends and Meta’s AI-driven growth prospects, the stock could justify a higher multiple, potentially pushing its value by nearly 10%, reaching around $755 – a significant jump from Friday’s closing price of $689.18.

This narrative around Meta is not just about current achievements but also about setting the stage for future growth in an increasingly AI-centric digital ecosystem. The company’s focus on AI is seen as a bet on the future of technology, advertising, and user interaction, which could keep investors confident even amidst broader economic uncertainties.

WallStreetPit does not provide investment advice. All rights reserved.

Be the first to comment

Leave a Reply

Your email address will not be published.


*

This site uses Akismet to reduce spam. Learn how your comment data is processed.