My growth-oriented pick entering 2025 is Meta Platforms Inc. (META). As the undisputed global leader in social media and digital advertising, Meta has created an unparalleled ecosystem that thrives on exceptional network effects and the potential for immense economies of scale, observes Nikolaos Sismanis, analyst at Sure Retirement.
In its latest earnings report, the company once again demonstrated its ability to deliver outstanding results, even as the social media landscape continues to mature. Meta reported impressive 19% year-over-year revenue growth in Q3, driven by higher ad impressions and increased pricing power. Its disciplined cost management allowed operating margins to expand significantly, too, fueling a 37% surge in earnings per share.
Entering 2025, Meta expects continued momentum. The company expects that its Q4 revenues will grow around 16% year-over-year. Based on this estimate and its strong year-to-date performance, consensus estimates project EPS of $22.63 for FY2024, representing an impressive 52% year-over-year growth.
Strong bottom-line gains are further anticipated in the years to follow, highlighting Meta's dominant position in the digital advertising space and the increasing effectiveness of its monetization strategies, particularly bolstered by its progress in AI. Specifically, Meta's investments in AI have boosted ad targeting and efficiency, creating sustained value for advertisers, who are now willing to pay growing CPMs.
This was evident in its most recent results as well, with the average price per ad rising by 11% year-over-year. Meanwhile, Meta's ventures into augmented reality and virtual reality through its Reality Labs division still have the potential to unlock transformative opportunities in immersive experiences. These areas could define new revenue streams, offering a compelling growth runway for years to come on top of the company's core offerings.
The stock's valuation adds another layer of appeal. At roughly 28 times this year's expected earnings, I believe that Meta offers a favorable entry point for growth-oriented investors. This multiple reflects a significant discount, considering Meta's robust EPS growth potential, which I estimate at a minimum of 15% annually over the medium term.
In fact, I would argue that Meta's numerous qualities justify an additional premium. The company possesses an unparalleled ability to deliver exceptional returns, driven by its unmatched scale. With nearly four billion users on its platforms every month, Meta has built a strong competitive edge and is uniquely positioned to benefit from global trends in digital engagement and commerce.
