Meta Platforms META isn’t cheap, by any means, but Meta Platforms stock will almost certainly continue its epic rally as the company effectively deploys AI across its social media platforms.
Let’s face it. Investors weren’t thrilled when CEO Mark Zuckerberg shifted the company’s focus to the metaverse. Yet, it looks like Zuckerberg is re-shifting Meta Platforms toward AI and investors are grateful for that. Furthermore, its AI spending is already paying off.
Spending Money to Make Money
There’s an old saying that you’ve got to spend money to make money. This appears to be the case with Meta Platforms, which frustrated some investors earlier this year because the company is spending a lot of money on AI technology.
Meta Platforms stock got slammed in April when the company guided for current-year capital spending of $35 billion to $40 billion. That’s higher than the company’s previous forecast of $30 billion to $37 billion. The increase in expenditures is based on higher AI-related spending.
Zuckerberg defended this, stating, “Historically, investing to build these new scale experiences in our apps has been a very good long-term investment for us and for investors who have stuck with us.”
At the time, however, some investors just didn’t see eye-to-eye with the Meta Platforms CEO.
Meta Platforms Shows ‘Ongoing Progress’ With AI
Months later, it appears that Zuckerberg had the right idea. Meta Platforms is deploying AI in meaningful ways.
As Barron’s pointed out, “AI is recommending a rising percentage of posts on Facebook and Instagram, and telling advertisers which content creators might be good fits for their brands.”
Consequently, Meta Platforms is now able to raise its prices for AI-enhanced advertisements. On that topic, KeyBanc analyst Justin Patterson observed a “meaningful uptick in Meta ad prices.”
Moreover, he believes that this “reflects ongoing progress with AI across engagement, ad relevance, and advertiser returns.”
There’s data to support this. According to Meta Platforms (via Marketing Dive), an “advertiser’s return on ad spend on its platforms is $3.71 in revenue for every dollar spent on advertising.”
However, when ad campaigns are enhanced with Meta Platforms’ AI-powered Advantage+ Shopping platform, the ROAS increased to “$4.52 in revenue for every dollar spent on advertising.”
Meta Platforms Stock: A Terrific High-Growth AI-Tech Pick
Patterson noted that the “demand for Meta Platforms’ advertisements remains very high.” Plus, he assured that Meta’s “returns for this AI advertising cycle are still very strong.”
It appears, then, that Meta Platforms’ emphasis on AI-enhanced services is already paying off big-time.
Therefore, even if Meta Platforms stock already rallied this year, it can and probably will continue to head higher. While Patterson sees the stock price reaching $540, I’d say that’s a conservative call.
Meta Platforms is a high-tech high achiever that’s effectively deploying AI in its advertising platforms. So, feel free to add some Meta shares to your portfolio today, with a price objective of at least $600.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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