Historical Trends Suggest Meta Platforms Could Experience Significant Growth in 2025
Historical Trends Suggest Meta Platforms Could Experience Significant Growth in 2025
Examining the past to anticipate future trends in the stock market isn't always spot-on, given that companies continually evolve alongside the broader market. However, it can be beneficial to check out how a stock behaved when it reached parallel market valuation or growth phases, especially for cyclical companies.
I recently employed this approach with Meta Platforms (META (-0.59%)), and the findings I unearthed should undoubtedly pique the interest of investors as we delve into 2025.
Meta Platforms offers robust growth at a reasonable price
Most wouldn't peg Meta, the holding corporation for Facebook and Instagram, as a cyclical enterprise. However, it is. Meta draws almost all its revenue from advertising, which fluctuates in response to business sentiment. If advertisers anticipate substantial consumer spending in the near future, they'll ramp up their advertising expenditure.
Meta's revenue growth remains steady, underscoring advertisers' belief that consumers will persist in spending at their current rates. This pattern mirrors 2019 through 2021, with the exception of a slight hitch due to COVID.
Although the revenue growth rate was slightly higher in 2019 through 2021, the overall ambiance and the scope of growth remain remarkably consistent. Additionally, the valuation appears almost identical on a price-to-earnings (P/E) basis.
Therefore, Meta is expanding at the same pace as it did from 2019 to 2021. The question, then, is how did it fare? Remarkably well, I'd wager.
Meta's stock soared during those three years, and I wouldn't be surprised if it enjoyed a successful 2025, given its historical track record.
Meta is a reasonable investment heading into 2025
With Meta boasting a robust history and its revenue growth charting a similar course as in the past, investors are warranted in feeling enthusiastic about 2025. Nonetheless, a couple of caveats warrant mention.
For 2025, Wall Street analysts project Meta's revenue growth to hover around 15%. While this falls short of the 2019 to 2021 range, it still reveals robust growth, given Meta's size.
As a mature corporation, most investors prioritize profit growth over revenue growth. That could dwindle in 2025, as management has cautioned investors to anticipate a "substantial increase in infrastructure expense growth next year."
This hike revolves primarily around Meta's artificial intelligence (AI) investments, necessitating the construction of additional computing power to secure market share in this essential domain. However, Wall Street analysts forecast 12% earnings-per-share (EPS) growth in 2025, suggesting that the increased spending won't unduly impact its earnings.
Despite a deceleration in growth and heightened spending, Meta Platforms remains one of the most affordable big tech stocks on the market. In comparison to other "Magnificent Seven" stocks (Nvidia, Microsoft, Apple, Amazon, Alphabet, and Tesla), Meta is the second-most affordable stock when valued with either trailing or forward earnings.
However, this doesn't imply that it's expanding at a sluggish pace. Meta's Q3 revenue growth ranked second fastest in the group, underlining Meta's cost-effectiveness for strong expansion.
Although the context for Meta isn't exactly the same as it was from 2019 to 2021, several parallels can be drawn. Combine this with Meta's affordability in relation to many of its peers, and I believe you have a formula for a stock that can deliver compelling returns in 2025. Consequently, Meta is one of my top stock picks for 2025.
In light of Meta Platforms' consistent revenue growth and stable valuation, it could be a worthwhile opportunity for investors to consider investing in, especially given its affordable price compared to other tech giants. später, when discussing potential challenges, one should also consider Wall Street analysts' predictions of 15% revenue growth for Meta in 2025, despite a projected increase in infrastructure expenses due to investments in artificial intelligence.
Considering Meta Platforms' robust historical performance and its favorable position when compared to other tech stocks, it could offer promising returns for investors looking to invest in 2025. Additionally, even with a predicted rise in expenses, Wall Street analysts still anticipate 12% earnings-per-share growth for Meta in 2025, suggesting that the company's income may not be significantly impacted.