Is this the right time to invest in Meta Platforms (META)?

Ever since Facebook rebranded as Meta Platforms (NASDAQ: META) to better reflect its focus on building the metaverse and offering users an all-new digital experience, there has been speculation about the company’s prospects under the new identity. While most of its metaverse plans are yet to become realities, Meta’s aggressive AI initiatives are driving advertising revenue which accounts for the vast majority of the social media giant’s top line.

Is META a Buy?

Meta’s stock has grown nearly six-fold in the past two years, which makes it one of the top-performing Wall Street stocks. Last week, the shares hit an all-time high and are trading close to $600. They have been on an upward spiral for quite some time, reflecting strong investor confidence in the AI-driven growth of Meta ecosystem – according to the management, Meta AI is on track to become the most used AI assistant by the end of the year.

The company’s long-term prospects look intact, with growth being driven by AI in the near term and metaverse investments expected to pay off in the long term. The stock continues to be a compelling investment despite the steady gains in the recent past. The market will be closely following the company’s third-quarter earnings, which is scheduled for October 30.

Traction with Youth

Recent data show that measures initiated by the tech firm to attract young users are yielding the desired results. Meta is bullish on the prospects of Threads, its microblogging platform that is steadily gaining users after getting a lackluster response initially. New technology is enhancing the quality of recommendations and driving engagement across Facebook and Instagram, while also driving ad revenues. It is estimated that WhatsApp serves more than 100 million monthly active users in the US alone.

Meanwhile, the company’s heavy investments in the metaverse are under scrutiny because it is likely to take a long time to monetize them. Earlier, the management had cautioned about Reality Labs, the division responsible for the metaverse project, incurring bigger operating losses as the year progresses.

Q4 Results

In the second quarter of 2024, advertising revenue accounted for about 95% of total revenue, which increased 22% from last year to $39.07 billion. There was double-digit growth across all geographical divisions. As a result, net income surged 73% year-over-year to $13.4 billion or $5.16 per share.  Both revenue and profit exceeded estimates. Family Daily Active People, a metric that measures the number of unique users who log in and visit at least one of the company’s core products on a given day, rose to $3.27 billion in the June quarter.

“At the end of the day, we are in the fortunate position where the strong results we’re seeing in our core products and business gives us the opportunity to make deep investments for the future — and I plan to fully seize that opportunity to build some amazing things that will pay off for our community and our investors for decades to come. The progress we’re making on both the foundational technology and product experiences suggests that we’re on the right track,” Meta’s CEO Mark Zuckerberg said at the Q2 2024 earnings call.

On Friday, Meta shares traded 30% above their 52-week average. META has been trading almost sideways since peaking early this month.