Here’s why I’m looking closely at Facebook owner Meta (NASDAQ: META) for my portfolio right now.
First, the share price of Mark Zuckerberg’s company is up a staggering 78% year-to-date. On the Nasdaq 100, only one other company has gained more than that.
Looking further back, investors who’ve held the stock for a decade have enjoyed a superb six times return on their investment. That’s even taking into account a shaky 2022 for the share price.
Best of all for the Facebook, Instagram and Whatsapp owner, the earnings report in February showed that the privacy changes Apple made on its devices haven’t had the impact many feared.
All this good news tempts to buy shares for the wealth-building potential, especially if I feel the stock can recreate its previous explosive growth. Here are some reasons why I believe it might.
Excellent growth
Meta has grown its business at an unbelievable rate. In the last 10 years, the firm’s revenue has expanded at double-digit percentages in every year except one.
Even in that off year, 2022, revenue grew at 4% on a constant-currency basis. Not bad for the worst year in a decade.
The company’s net income has grown to a gargantuan $23bn. That’s more than the total revenues of whole countries like Bulgaria, Iceland or Uruguay, and much of that income is earmarked for further growth opportunities.
This fantastic track record of creating and growing profits bodes well for the shares, I feel. If the company keeps growing, then my shares should be worth more.
What does the future hold?
So, the obvious question has to be: is there room for more growth? After all, with nearly 4bn monthly active users across its products, perhaps Meta is running out of people left in the world to start using its products.
The firm’s biggest two products, Facebook and Instagram, are already the two highest-grossing social media websites. This could be a sign that the sites might not have a lot of further monetisation potential.
A saturated market and saturated products are big risks. I wouldn’t expect huge returns in that situation.
Three reasons to be cheerful
However, I’m optimistic that the company has further to expand. For one, its investment in VR technology/the metaverse could be a catalyst for huge future growth if these virtual worlds take off.
Second, Whatsapp is hugely popular but not well-monetised at the moment. If Meta could make Whatsapp profitable the same way they did Facebook, then I’m sure I’d see some excellent gains on my investment.
Finally, I think there’s something special about the FAANG stocks like Apple, Amazon and of course Meta (the F in Meta’s former name, Facebook, provides the first letter of the FAANG acronym).
The best minds in the world work for these companies. And such incredible talent is a reason, in my view, that these big tech firms have enjoyed some of the biggest and fastest gains in stock market history, and why they could continue to do so in the future.
All things considered, I think Meta is in an extremely exciting place right now and could help me build wealth as a stock in my portfolio. The next time I have some spare cash available I’ll strongly consider opening a position.
This post was originally published on Motley Fool
