In This Article:
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Nvidia and Palantir are collectively worth $4.6 trillion today, and Meta Platforms has a reasonably good shot at surpassing that figure within five years.
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Meta Platforms is using artificial intelligence to strengthen its ad tech business, and the company is an early leader in the smart glasses market.
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Wall Street expects Meta's earnings to grow at 17% annually in the next three to five years, but analysts have regularly underestimated the company.
Shares of Nvidia have advanced 29% year to date, leaving the chipmaker with a market value of $4.2 trillion. And shares of Palantir Technologies have surged 104% year to date, bringing its market value to $365 billion. That means the companies are collectively worth $4.6 trillion.
I think Meta Platforms (NASDAQ: META) can surpass that figure in five years. The company is currently worth $1.9 trillion, so its market value needs to increase 150% to $4.7 trillion by 2030 to satisfy my prediction. In that scenario, the stock would return about 20% annually.
My forecast is aggressive, but investors have good reason to think Meta is equal to the challenge. Here's why.
Meta Platforms owns three of the four most popular social media platforms in Facebook, Instagram, and WhatsApp as measured by monthly active users. Those three platforms also ranked among the four most downloaded social applications for mobile devices last year, meaning the company is successfully defending its dominant position in the industry.
Meta currently earns the vast majority of its revenue from advertising. Its ad tech tools help brands reach consumers with relevant ads across its social media platforms, as well as third-party websites and mobile applications. What advertisers are willing to pay depends on user engagement and campaign performance, and the company is leaning on artificial intelligence (AI) to improve both metrics.
CEO Mark Zuckerberg recently told analysts, "AI is significantly improving our ability to show people content that they're going to find interesting and useful." Improved recommendations led to a 5% increase in time spent on Facebook and a 6% increase in time spent on Instagram in the second quarter. Also, more brands used Meta's AI creative tools, leading to 3% more ad conversions on Facebook and 5% more on Instagram.
Here's the bottom line: Meta Platforms is the second largest ad tech company, behind only Alphabet's Google, and it is successfully using AI to strengthen its value proposition for consumers and brands. Ad tech spending is forecast to increase at 14% annually through 2030, according to Grand View Research. That gives Meta a good shot at similar earnings growth within its advertising segment.