Meta’s Meteoric Rise in 2023 Shows No Sign of Slowing This Year

The fall and rise of Meta have been nothing short of astonishing in recent years. After shedding more than 70% of its value amid 2022’s tech stock sell-offs, the stock surged 180% in 2023–and the tech giant is far from finished.

It’s difficult to find the right superlatives for Meta [NASDAQ: META]. The stock became one of the best performers on the global stage last year, and the company’s measured approach to embracing artificial intelligence formed a key component of its impressive growth.

Today, Meta has almost recovered all of its losses amid severe economic headwinds in late 2021 and 2022 and has recaptured a market capitalization of almost $1 trillion.

The stock’s impressive movements throughout the past 12 months have seen it become one of the stars of the ‘Magnificent Seven,’ a collective of leading tech stocks including Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla.

But as the generative AI boom rumbles on and ideation shifts towards implementation for the emerging technology, can Meta continue to facilitate its growth throughout 2024? Let’s take a deeper look at why Meta has become the stock that investors are coveting most this year:

Finding Strength in Fundamentals

It’s impossible to ignore Meta’s underlying financial strength as a key attribute to 2023’s impressive Wall Street growth.

“The company has demonstrated strong financial performance, with a 23% growth in revenue to $34.1 billion in the third quarter of 2023, surpassing expectations,” highlights Maxim Manturov, head of investment research at Freedom Finance Europe.

“Meta's vision for the effectiveness of the company has translated into reality, and its diverse user base supports profitable, targeted advertising, a significant revenue driver.”

In addition to its impressive revenue growth, Meta is an attractive proposition for advertisers, thanks to its extensive data reservoirs that pave the way for more targeted campaigns. As a result, the firm’s advertising revenue has increased 23% in Q3 to $33.6 billion.

However, it appears to be Meta’s inroads in the field of artificial intelligence that will help to leverage growth in 2024. Meta’s AI offerings currently include Quest 3, AI-powered Ray-Ban Stories, and the AI Studio platform.

With a significant free cash flow (FCF) balance of $13.6 billion by the end of Q3 2023, analysts are expecting AI investments to improve stock performance in the new year, anticipating revenue rising 13% year-over-year to $151 billion, while earnings are expected to rise 21% over the same time frame.

According to a team of Mizuho Securities analysts led by James Lee, there could be three catalysts to push Meta’s stock higher in 2024. The first comes in the form of a conservative consensus for sales growth, which may prove to be stronger thanks to better monetization of Reels short videos and growing interest from Chinese advertisers.

Secondly, the analysts believe that guidance on operating expenditures could fall over the financial year, which is a trend with some precedence. Finally, WhatsApp messaging performance may contribute to the revenue base by as much as a third due to the implementation of AI for automated customer service.

Finding Strength in AI

So far, much of the positive sentiment surrounding Meta in 2024 stems from optimism surrounding generative AI. There’s a good reason for this.

While Meta has long utilized AI within its businesses in the form of identifying faces posted on Facebook and delivering curated content and ads for its users, the future of the company lies in its utility of generative AI services.

In early 2023, Meta launched a suite of free AI-powered marketing tools for firms to bolster their social media advertising. Through an Ads Manager, images and text can be adapted from user to user to target their products more effectively.

Crucially, this launch of AI tools has helped to make Facebook an even more attractive prospect for companies seeking to improve their marketing ROI.

For Meta CTO Andrew Bosworth, the arrival of generative AI was an opportunity for Meta to ramp up its operations.

“AI has always been a major component of our thinking,” Bosworth explained. “But like all technologies, you’re in these S curves. We’ve known for three or four years that these generative AI, large language models were a big deal, but they still felt like infrastructure. That’s why I think the OpenAI introduction of ChatGPT is so interesting.”

“I’m not trying to say we were prescient. We had been investing, and we believed in this technology. For all of that belief, it still snuck up on us. It was like, ‘Oh my god, it’s here. We’ve got to do things differently. We’ve got to change it up.’”

Will Meta Lead the ‘Magnificent Seven’ in 2024?

To better understand Meta’s position among the Magnificent Seven, it’s worth exploring its PEG ratio, which refers to the stock’s price/earnings in comparison to the company’s growth.

With a PEG ratio of 1.2, Meta features the second-best ratio of the seven Wall Street leaders, falling behind Nvidia with an impressive 0.95 PEG.

As another stock that’s heavily exposed to generative AI, Nvidia’s growth in 2024 will hinge on the development of the emerging technology and the success of the implementation process as more enterprises seek to embrace the GenAI boom.

Meta, on the other hand, will rely on its rich history of innovation to harness the power of generative AI based on its products and services.

With Meta’s history of resilience and strategic acumen in often unpredictable tech markets, we could see the stock outpacing its Magnificent Seven rivals in 2024, and with solid fundamentals continuing to drive growth, there’s no reason why Meta shouldn’t be at the top of investor priority lists for the year ahead.