With the ascent of artificial intelligence (AI), the “Magnificent Seven” stocks have become perhaps the most discussed companies in the stock market. Bank of America analyst Michael Hartnett has included these seven renowned American tech giants—Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (Google’s parent company) (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) (formerly Facebook), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA)—in this group.

While the AI wave has propelled the growth of these companies since last year, leading to soaring stock prices, AI is not the sole reason to favor them. Over the past few years, these seven companies have epitomized innovation and profitability while maintaining strong market positions.

After their impressive performance in 2023, most of these seven stocks have continued to rise significantly this year, with a few exceptions:

Apple: down 11.4%

Amazon: up 16.9%

Alphabet: down 3.4%

Meta Platforms: up 44.9%

Nvidia: up 86.4%

Microsoft: up 8.9%

Tesla: down 27.5%

Except for Nvidia, Meta Platforms stands out, significantly outperforming the S&P 500 Index’s gain of 7.6%. Let’s explore whether Meta is the best stock among the “Magnificent Seven” to buy at present.

Meta Platforms is On the Right Path

Until October of last year, investors were uncertain whether Meta would join the $1 trillion market cap club alongside other tech giants. As of today, with a market cap of $1.3 trillion, the social media tech company has officially joined the club.

Initially known for Facebook, Meta now boasts a suite of widely used social media platforms including Instagram, WhatsApp, Messenger, and the newly introduced Threads. According to CEO Mark Zuckerberg, over 3.1 billion people use at least one of Meta’s applications.

According to Statista, three of Meta’s platforms rank among the top five most popular social media networks globally. In 2023, Facebook reported 3.07 billion monthly active users (MAU).

This strong consumer loyalty is driving Meta’s revenue and profits. In the latest fourth quarter, its Family of Apps (FoA) segment, consisting of its social media platforms, generated $39.0 billion in revenue, accounting for 97% of total revenue. The segment’s operating income stood at $21.0 billion, a 97% year-over-year growth.

On the other hand, the metaverse-focused Reality Labs (RL) segment has faced challenges in recent quarters. However, the segment saw a 47.1% year-over-year increase in revenue in Q4, driven by strong sales of its mixed reality headset, Quest 3, launched last year.

For the full year 2023, Meta’s revenue and diluted earnings per share grew by 16% and 73%, respectively.

Sky Is the Limit for Meta Stock

In addition to Quest 3, Meta introduced several AI-powered products last year, including the Meta AI-powered Ray-Ban smart glasses and generative AI stickers, among others.

Furthermore, the Reality Labs segment is showing signs of recovery. It has significant potential in the expanding global metaverse market, which is expected to be worth $1.3 trillion or more by 2030.

The company is also experiencing strong growth on the WhatsApp Business platform. Additionally, Threads reported around 130 million active users in 2023. Meta’s CFO, Susan Li, stated that monetization opportunities for Threads could be developed in the future.

Given that social media is its dominant business, Meta largely relies on advertising for revenue. In 2023, Meta’s ad revenue reached $131.9 billion, up from $113.4 billion in 2022. While the ad market faced challenges last year, experts anticipate a recovery this year, contributing to Meta’s growth.

On the balance sheet, Meta finished the quarter with $65.4 billion in cash, cash equivalents, and marketable securities, as well as $18.4 billion in long-term debt.

Meta is Now a Dividend Stock

Another positive development in Q4 is that Meta is now a dividend-paying stock. Thanks to its substantial free cash flow balance of $11.5 billion, Meta announced its first quarterly dividend of $0.50 per share. With the growth in earnings and FCF, investors can expect continued dividend payments on a quarterly basis. The company also announced a $50 billion increase to its share repurchase program.

Management anticipates Meta’s first-quarter 2024 revenue to be in the range of $34.5 billion to $37 billion, in line with analysts’ estimates.

Looking ahead, analysts expect Meta’s revenue to increase by 17% year-over-year to $158.4 billion in 2024. Additionally, EPS is expected to grow by a significant 34.4% to $19.98. Furthermore, in 2025, revenue and earnings are expected to increase by 12.4% and 16%, respectively.

Meta’s stock is trading at approximately 21 times its projected 2025 earnings, which seems reasonable for a stock with exceptional long-term AI opportunities. In comparison, its peers Amazon and Microsoft are trading at 32x and 30x forward earnings, respectively.

Analysts’ Expectations for Meta Stock

Out of the 44 analysts covering Meta stock, 39 have a “strong buy” recommendation, one rates it a “moderate buy,” three suggest it’s a “hold,” and one suggests a “strong sell.”

Meta is trading close to its average price target of $500.98. However, its Street-high estimate of $575 implies a potential upside of about 12% in the next 12 months.

The Bottom Line on Meta Platforms Stock

Among the Magnificent Seven, Nvidia, Alphabet, Microsoft, and Amazon are also expanding rapidly and experiencing explosive growth, thanks to AI. Given this, it is challenging to single out Meta Platforms as the crown jewel.

However, I believe the company is one of the most promising AI investments to make right now. As Meta continues to explore its AI capabilities, along with untapped potential in some of its segments, it could see more growth than anticipated. Overall, Meta remains an excellent stock to buy and hold for the long term.

Featured Image: Unsplash @ Julio Lopez

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