This Mega-Cap Tech Stock Could Lead Its Peers to the Biggest Gains in 2025

view original post

Meta Platforms (NASDAQ:META) is among the leading mega-cap tech stocks investors basically need to own right now. That’s partly due to the stock’s weighting in most indices (under-weighting this stock relative to any index has proven to be a disastrous exercise in the past) but also due to the company’s continued outperformance relative to its peers coming out of what was a rough 2022.

Meta’s resurgence to become a top growth stock in the social media and digital advertising world has been remarkable. The company has streamlined its operations, focusing on improving efficiency and creating meaningful cash flow and earnings growth with its existing operations. Given the fact that 3.2 billion daily users bless the company’s Facebook, Instagram, WhatsApp, and Messenger platforms, making these tweaks have proven to be very fruitful. The company’s advertising income rose 19% year-over-year to $39 billion in the latest quarter, highlighting a blistering pace of growth for a company of its size. And as the company works on solidifying its presence in the world of AI (via its Llama large language model and other integrations), this is a company that looks poised to remain a leader in its field for years to come. 

If these double-digit revenue and earnings gains continue to be seen in coming quarters, I have no doubt that Meta could lead its mega-cap peers higher in 2025. Here’s the bull case behind what would drive such a move.

Key Points About This Article:

• Meta Platforms remains one of the most important stocks in most investor portfolios, and that’s unlikely to change in 2025 and moving forward.
• Here are a few key catalysts and growth drivers for the company in the quarters to come, and what investors may want to watch.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Impressive Global Ad Revenue Growth

The world of advertising has clearly shifted, with advertisers increasingly looking to reach users where they’re at. And given the astronomical number of eyeballs (more than 3.2 billion daily active users) across Meta’s platforms, Meta is going to continue to retain significant market share (and potentially grow this market share over time).

One might think that since the company has nearly half of the world’s attention, growth may not be possible. From a user standpoint, there are certainly saturation concerns (any company can only grow so large).

But Meta’s pricing power has been incredible, with the company’s dominant $100 billion in ad revenue dwarfing most of its peers. Assuming the company’s pricing power remains intact, revenue and earnings growth can come simply from price increases over time. User attention is bound to become more expensive, and Meta has done a fantastic job of powering the platforms billions of users spend a tremendous amount of time on. That’s worth a lot, particularly when one thinks about the brands that want to connect with a younger audience. 

Facebook’s Q3 2024 ad revenue grew 13.2% year-over-year, eclipsing the $100 billion mark in terms of annual revenue. However, some critics have pointed out that the company’s global social ad market share is shrinking, expected to drop to 38.2% by 2025.

That’s still a significant share, and is indicative that there’s competition out there. But as mentioned, I think Meta has some of the most robust pricing power in the market, and should remain a cash flow and earnings growth engine for years to come. At the end of the day, Meta is a fundamentally-driven stock, and that’s likely going to be good for investors moving forward.

The Company’s AI Game Is Picking Up

Meta’s reliance on AI for content recommendations has positioned the company for even greater growth, if AI adoption increases as many experts suggest. The company has forged an interesting business in the world of large language models with its Llama platform, which certainly has growth potential. But it’s the company’s potential for integrations using a unified recommendation system that has so many investors excited.

I certainly think most AI-related catalysts are worth keeping an eye on. And while projections vary widely based on the speculative nature of forecasting future cash flows directly tied to these investments, Meta is clearly refocusing its capital away from the metaverse and toward AI – a move the market likes.

Notably, the company is also leveraging generative AI to help marketers create and test hundreds of ad variations, optimizing targeting and creativity for maximum results. CEO Mark Zuckerberg envisions a future where advertisers simply provide objectives and budgets, with Meta handling the rest. Such a future would likely result in significant sales growth, and allow the company to do more with less. On the basis of increasing efficiency, something the company has been at for years, that’s a great thing for shareholders.

2025 Is Shaping Up to Be a Solid Year for Meta Investors

Meta’s market cap stands at roughly $1.5 trillion, so this company is one that investors looking for mega-cap tech exposure continue to flock to. The company is spending heavily on AI which could provide temporary pressure on margins. But cash flow growth remains robust, enabling additional share buybacks (and likely continued dividend growth). These factors make Meta a unique stock in this space, and I actually expect a dividend narrative to emerge in the quarters to come, as the company hikes its distributions over time.

I think Meta is well-positioned to continue to grow its earnings and cash flows meaningfully as the advertising market increasingly shifts online. In the markets that matter, Meta is the clear winner. So, for long-term investors looking for a company with AI catalysts that’s a cash flow machine and has plenty of growth potential, Meta is probably my top pick in the mega-cap tech space at least over the next year.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.