If I’d invested £1k in Meta shares a year ago, here’s how much I’d have today

Meta shares are among the best-performing US stocks over the past 12 months, benefiting from positive investor sentiment, especially towards AI.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young mixed-race woman jumping for joy in a park with confetti falling around her

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Meta (NASDAQ:META) shares are up 104.5% over the past 12 months. So factoring in the 10% appreciation of the pound, today I’d have around £1,900 if I’d invested £1,000 in Meta shares a year ago. That’s a really strong return.

Volatile

Meta is worth $778bn, meaning its three times larger than the biggest company on the FTSE 100. However, that doesn’t stop it from being volatile. In fact, I’ve been shocked over the last year by the size of the swings we’ve seen in some of these huge US-listed companies.

Last November, Meta shares fell as low as $88. Today, the stock trades for just over $300. Should we have seen it coming? Quite probably. The social media giant is at the forefront of artificial intelligence (AI) and wasn’t expensive by any means.

My buy case

Despite already being up 100% over 12 months, I recently added the stock to my portfolio. I believe this bull run still has further to go.

Meta has delivered back-to-back earnings beats this year. Improved performance has been positively influenced by a cost-cutting initiative and a focus on the monetisation of its vast social media empire.

Source: Meta Q2

One of the key drivers of Meta’s recent growth has been the success of its new Threads platform. Threads, which became the fastest-growing social media application ever, already has 130m users.

Many analysts believe that if monetised correctly, Threads could generate up to $3bn in revenue over the coming year.:

I’m also attracted by Meta’s move into the virtual reality (VR) space. I appreciate that Meta lost $13.7bn on its Reality Labs division, which is the part of the company that makes VR headsets.

However, I think VR is a lot more than just a gaming gimmick. It has endless applications and, among other things, could prove hugely valuable for developments in medical training.

Meta is working on developing VR applications for business, education, and other uses, but it’s unclear when these will become mainstream.

Source: Meta

For a company at the forefront of the tech space, Meta isn’t expensive, trading at 5.6 times forward sales and 22.5 times forward earnings. Compared to AI-leader Nvidia, it’s phenomenally cheap. 

Overall, I believe Meta is a well-positioned company with a number of factors working in its favour. The company has a strong track record of financial performance, an attractive valuation, and is at the forefront of AI and the VR space.

Bear case

However, given the current global economic slowdown, I’m wary that demand for advertising — a major revenue source — could fall, putting downward pressure on revenue per advertisement.

Businesses tend to trim their advertising budgets during economic downturns, which could impact the performance of advertising-dependent parts of the business — almost all of it.

Nonetheless, while there are some risks associated with the stock, I believe the potential rewards outweigh the risks.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. James Fox has no position in any of the shares mentioned. The Motley Fool UK has recommended Meta Platforms and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could this brilliant airline stock be the most undervalued company on the FTSE 100?

Our writer believes this FTSE 100 stock may provide market-beating returns over the coming years, noting its undervalued metrics and…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

The Rolls-Royce share price is discounted by 13.4%, analysts say

Our writer explains why analysts think the Rolls-Royce share price is lower than it should be, noting long-term earnings growth…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

If I’d invested £100 when the Lloyds share price crashed 15 years ago, here’s what I’d have now

Our writer thinks the Lloyds share price will see a period of steady growth in the coming years despite a…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

Is Nvidia stock now becoming a joke?

Nvidia stock is up 155% in 2024 alone and the AI golden child has become the largest company in the…

Read more »

Investing Articles

3 top UK dividend shares to consider buying for lasting passive income

These dividend shares might look a bit risky for taking home cash right now. But building a pot for future…

Read more »

Hand is turning a dice and changes the direction of an arrow symbolizing that the value of an ETF (Exchange Traded Fund) is going up (or vice versa)
Investing Articles

1 top-notch ETF I plan to own in my ISA for the next 10 years

Our writer highlights a thematic ETF that he plans to hold in his Stocks and Shares ISA portfolio for many…

Read more »

Investing Articles

8.1% dividend yield! 2 dirt cheap passive income stocks I’d buy to target £1,620

Looking for top passive income stocks to buy on sale? I think these two property giants could be too cheap…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Could Raspberry Pi shares hit £5 by 2030?

After a strong start out of the blocks this month, our writer asks whether Raspberry Pi shares could move further…

Read more »