Can this unstoppable stock double in 5 years?

It’s no surprise that most investors want high returns from the stocks that enter their portfolios. The ideal situation, to be more specific, is to find a business that can outperform S&P 500a very followed reference.

That is precisely what Metaplatforms (NASDAQ: META) he has, and then some. The stock is up an impressive 178% since January 2020. This market performance is certainly attracting enthusiasm from the investment community.

However, what interests investors is the future. This can be unstoppable”Magnificent SevenDoubling stocks in the next five years?

Meta’s position at the forefront of the Internet industry is supported by some notable features that make it clear how exceptional the company really is. Investors will have no trouble finding a clearing economic moat. In the case of Meta, it possesses incredibly powerful network effects.

This is true if you look closely at its family of apps, which includes Facebook, Instagram, WhatsApp, Messenger, and Threads, which generated 99% of total revenue in Q3 2024.

When a product or service improves with more users and use, it can be the result of network effects. Meta has 3.29 billion daily active users on its social media apps. People want to use them because everyone they know is using them, and there’s practically an unlimited number of connections that can be made.

This makes it almost impossible for anyone to dethrone Meta’s position in the sector. Of course, any well-funded tech entrepreneur could launch a new social media app. But getting people and businesses to sign up for accounts and start participating more could be an impossible task.

Another wonderful quality is Meta’s incredible profitability. It earned net income of $15.7 billion on total sales of $40.6 billion in the third quarter, resulting in a strong. free cash flow which fuels dividends and share buybacks. This increases returns for investors.

What’s really remarkable is how the company’s operating margin jumped from 25% in 2022 to 43% in the third quarter of 2024. Despite significant expense controls, revenue still rose 47% between the third quarter of 2024 2022 and the third quarter of 2024. This tells Em that Meta has enormous earning power.

Even with $156 billion in trailing 12-month revenue, it’s easy to be optimistic about the company’s growth prospects. The consensus view among Wall Street analysts is that sales and earnings per share will grow at an annualized rate of 13.7% and 12.9% between 2024 and 2026.

Given the historical trajectory of the business, it is not unreasonable to expect this double-digit pace to continue through the end of this decade. This is because the global digital advertising market is poised for strong growth. And Meta is able to serve more ad impressions at higher average prices per ad. That’s what happened in the third quarter.

Meta plans to have “significant growth in capital expenditures in 2025,” according to CFO Susan Li. That compares to between $37 billion and $40 billion last year.

Much of this includes focused investments to boost the company’s network infrastructure to support it artificial intelligence ambitions. That could add more growth potential: Meta isn’t resting on its laurels and aims to be at the forefront of what many industry executives believe is the next game-changing technology.

Meta has been a winner in the past. However, the shares still you trade today at a reasonable forward price-to-earnings (P/E) ratio of 24.2. By comparison, heavy technology Nasdaq-100 indexThe forward P/E multiple of 25.1 is above Meta’s.

It’s hard to gauge why Meta stock still trades at such a compelling valuation, especially compared to most other Magnificent Seven peers, and despite the company reporting such stellar financial performance in recent quarters . But this presents an opportunity for investors.

Given the outlook for strong earnings growth, along with a compelling valuation, I wouldn’t be surprised to see Meta stock double by 2030.

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Randi Zuckerberg, former CMO and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Neil Patel and its clients have no position in any of the shares mentioned. The Motley Fool has positions and recommends Meta Platforms. The Motley Fool has one disclosure policy.

Can this unstoppable stock double in 5 years? was originally published by The Motley Fool

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