From Nasdaq: 2025-06-16 01:33:00

META Platforms stock (NASDAQ: META) has surged 16% this year, outperforming the NASDAQ index by 14%. Over a longer period, Meta’s stock has increased by 97% since early 2024, reaching around $700 per share. The company’s key growth drivers include a rise in its Price-to-Sales ratio, revenue increase, and a slight reduction in total shares outstanding.

Meta Platforms’ revenue growth is fueled by rising ad impressions and increased average price per ad. Family daily active people have also grown by 7.5% to 3.43 billion. The company’s net income margin has expanded from 29% to 39%, with fewer shares outstanding due to significant share repurchases. This has led to a 72% increase in the company’s bottom line.

Investor optimism in Meta’s stock is driven by the company’s AI push, leading to higher advertising revenues through boosted user engagement and effective ad targeting. The integration of generative AI across its platforms has significantly improved profitability, reflected in a solid 39% net income margin. As a result, Meta’s Price-to-Sales ratio has expanded from 6.9x in 2023 to 10.6x currently.

While META stock has shown strong performance, its consistency has been variable. Returns in previous years have fluctuated, underperforming the S&P in 2021 and 2022. Investors may want to consider the Trefis High Quality Portfolio, which has outperformed the S&P with less risk. From a valuation standpoint, Meta’s stock is currently fully priced, trading at 10.6 times its trailing revenues, higher than its four-year average.

Despite Meta’s robust advertising growth, investors should be cautious about the uncertainty surrounding AI investments and long-term earnings growth. The company’s aggressive spending on AI infrastructure poses a potential risk, with $64 to $72 billion planned for this year alone. While META stock may seem fully valued, investors should carefully monitor the company’s AI investments and their impact on future growth.



Read more at Nasdaq: The Factors Fueling Meta’s Stock Rally