Why Meta Platforms May Not Be a Winner This Next Year

"Indeed, investors who have bought and held Meta stock for any extended period of time are happy they've done so. The social media giant has billions of eyeballs across its various online platforms. What's perhaps most impressive about Meta's business model is the fact the company has done such a great job of monetizing these eyeballs over the years, benefiting from some very strong demographic growth trends as well."

"The so-called "Santa Claus" rally many investors bank on this time of year centers around a specific period of time (pretty much right now through mid-January), when stocks historically tend to rally. It's not just "most of the time" this happens - roughly 80% of instances throughout modern history, investors have had a profitable three week period here. Thus, with strong seasonality at investors' backs, it's hard to see how Meta could be a laggard."

"That said, I'm of the view that much of Meta's recent growth may already be priced in. That goes for many of the top tech giants in the market that have been investing heavily in AI. Why do I say that's possible? Well, questions are really starting to circle around companies like Meta that are really ramping up spending on their AI initiatives."

Meta Platforms reaches billions of users across multiple online platforms and has historically monetized that audience effectively, aided by favorable demographic trends. The company trades at an attractive valuation relative to its Magnificent 7 peers while maintaining a growth model that remains intact. Late-year seasonality and the historical Santa Claus rally could support near-term performance. Much of recent growth appears to be priced into the stock, however, and aggressive ramping of AI spending has raised investor questions. Those concerns have fueled episodes of volatile, double-digit valuation swings, increasing near-term downside risk for shareholders.

Read at 24/7 Wall St.