HomeBusinessOne sizzling artificial intelligence (AI) stock to buy with Hand Over Fist...

One sizzling artificial intelligence (AI) stock to buy with Hand Over Fist in April

The artificial intelligence (AI) space is red hot right now. Companies in every sector want to take advantage of the technology and are investing heavily to gain a competitive edge. This also applies to social media, where advertisers want to reach the right target group for them.

While the social media landscape is packed with competition, one company stands out from the rest. Metaplatforms (NASDAQ: META) is making strides in various aspects of the AI ​​realm, and its performance against the competition is showing.

Let’s take a look at why investing in Meta now is a lucrative opportunity as the long-term AI story plays out.

The profit machine is running

One of the most attractive aspects of Meta is how efficiently management runs the company. In 2023, Meta’s revenue grew 16% year over year to $135 billion. However, the company increased revenue from operations by a whopping 62% year over year to $46.7 billion.

By expanding its operating margin, Meta also achieved significant growth in operating income. Last year, the company generated $43 billion in free cash flow. With such a robust financial profile, Meta is well positioned to invest profits back into the business and reward shareholders.

An AI semiconductor chip on a printed circuit board.

Image source: Getty Images.

Investing for the future

During Meta’s fourth-quarter earnings call in February, investors learned how the company is deploying its cash pile. For starters, it has increased its stock buyback program by $50 billion. This is encouraging to see, as it could imply that management views Meta stock as a good value.

See also  Half of Wall Street analysts now call this beaten stock a buy, and one sees a 60% upside

But perhaps more exciting was the announcement of a quarterly dividend. Many fast-growing technology companies are not in a financial position to pay dividends – or instead choose to reinvest their profits in research and development or marketing strategies. Meta’s new dividend certainly sets the company apart from many of its peers and is a nice sweetener for long-term shareholders.

Another way Meta is using its cash flow is in the field of artificial intelligence. Like many companies, Meta relies heavily on advanced graphics processing units (GPUs). Nvidia. However, Meta has been hinting for some time that the company is investing in its own hardware. Earlier this month, Meta announced that an updated version of its training and inference chips, called MTIA, is now available.

This is important for a number of reasons. With internal chips, Meta can “control the entire stack” and reduce its dependence on third-party semiconductors. Furthermore, given the knowledge base of data the company collects from social media platforms Facebook, Instagram and WhatsApp, these new chips position Meta to improve its targeted recommendation models and advertising campaigns through the power of generative AI.

See also  GameStop's 'Roaring Kitty' wave doesn't mean the meme stock rally has legs

A convincing appreciation

Meta competes with a number of players in the social media landscape. Alphabet is one of the company’s biggest competitors, as it operates the two most visited websites in the world: YouTube and Google. However, in 2023, Alphabet only grew its core advertising business by 6% year-on-year. In contrast, Meta’s advertising segment rose 16%.

While Meta’s price-to-sales ratio (P/S) of 10 is higher than many of its social media peers, the company’s growth in the highly competitive and cyclical advertising landscape may justify the premium.

META PS Ratio ChartMETA PS Ratio Chart

META PS Ratio Chart

Furthermore, the stock may not be as expensive as it seems, as Meta’s price-to-free cash flow ratio of around 31 is actually trading relatively in line with its 10-year average of 32.

Overall, I’m optimistic about Meta’s aggressive ambitions in artificial intelligence – an investment that has yet to materialize. The AI ​​story will be a long-term story. But I see Meta as extremely well-equipped to capitalize on secular themes that fuel AI and benefit the entire company.

The combination of a dividend, share buybacks, consistent cash flow and a compelling AI play make Meta stand out in a highly contested AI landscape. I think this is a great opportunity to pick up shares in Meta and prepare to hold it for the long term.

See also  Tripadvisor is ruling out a merger for the time being

Should You Invest $1,000 in Meta Platforms Now?

Before you buy shares in Meta Platforms, consider this:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $540,321!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns April 15, 2024

Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions at Alphabet, Meta Platforms and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Meta Platforms, Nvidia, and Pinterest. The Motley Fool has a disclosure policy.

A Once-In-Time Investment Opportunity: 1 Sizzling Artificial Intelligence (AI) Stocks to Buy in April Hand Over Fist was originally published by The Motley Fool

- Advertisement -
RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments