Will Meta Platforms Be a $2 Trillion Stock by 2025?

Sarah Emerson
7 Min Read

Back in the summer of 2021, Meta Platforms (NASDAQ: META) — then known as Facebook — became a trillion-dollar company. But it dropped out of that elite club over the following two years as it grappled with Apple‘s (NASDAQ: AAPL) privacy changes on iOS, stiff competition from ByteDance‘s TikTok, and fierce macro headwinds.

Meta saw some recovery in 2023 and became a trillion-dollar company again in January 2024. With its 20% post-earnings stock price pop on Feb. 2, the company boosted its market cap to $1.2 trillion. Can it maintain that momentum and become a $2 trillion stock by 2025?

Meta Platforms Ceo Mark Zuckerberg.
Meta Platforms Ceo Mark Zuckerberg. Image Source: Meta Platforms.

Why did the bulls rush back?

Meta’s revenue rose 37% in 2021 but declined 1% in 2022 as the aforementioned challenges curbed the growth of its advertising business. As Meta’s revenue growth cooled off, it remained committed to the expansion of its unprofitable Reality Labs segment, which housed its augmented reality and virtual reality products.

Its cooling sales and rising costs reduced its operating margin from 40% in 2021 to 25% in 2022. Its earnings per share, which had risen 36% in 2021, dropped by 38% in 2022. Those declines, along with rising interest rates, drove the bulls away from Meta. By Nov. 3, 2022, its stock had sunk to a seven-year low of $88.91 and reduced its market cap to $236 billion.

But in 2023, Meta’s revenue and EPS rose 16% and 73%, respectively. Its year-over-year revenue growth accelerated through all four quarters of the year as its advertising business recovered. Its operating margin expanded again to 35%.

That recovery was driven by three catalysts. First, Chinese e-commerce and gaming companies ramped up their spending on Facebook and Instagram to reach more overseas customers. Those Chinese ad buyers accounted for 10% of Meta’s revenue in 2023 and contributed five percentage points to its total revenue growth.

Second, Meta revamped its advertising algorithms to gather more first-party data and counter Apple’s iOS changes. It also monetized its short video platform Reels more aggressively with AI-driven recommendations to keep pace with TikTok.

Lastly, Meta overcame a 9% decline in its average ad prices in 2023 with a 28% increase in its total ad impressions. That growth was buoyed by the ongoing expansion of its Family of Apps (Facebook, Messenger, Instagram, Threads, and WhatsApp), which grew its monthly active people by 6% to 3.98 billion globally for the full year.

Meta continued to expand its unprofitable Reality Labs business, but it more than doubled its free cash flow (FCF) to $43 billion for the full year as it laid off thousands of employees and executed other cost-cutting measures. That excess cash enabled it to expand its current buyback authorization by $50 billion and initiate its first-ever quarterly dividend of $0.50 per share. All of that good news brought back a stampede of bulls.

The mathematical path toward $2 trillion

From 2023 to 2026, analysts expect Meta’s revenue to grow at a compound annual growth rate (CAGR) of 13% as its EPS rises at a CAGR of 22%. Based on those expectations, its stock still looks reasonably valued at 24 times forward earnings.

Metric202420252026
Estimated revenue growth17%11%12%
Estimated EPS growth32%14%19%

Analysts’ estimates. Data source: Marketscreener.

Assuming Meta maintains that forward multiple and matches Wall Street’s expectations, its stock could be trading at nearly $650 a share with a market cap of $1.65 trillion. But if the bulls get a little bit more excited and pay about 30 times forward earnings for Meta’s stock by the end of 2025, it could be worth just over $2 trillion.

We should be skeptical of those long-term estimates since Meta could still face some unpredictable macro, competitive, and regulatory headwinds over the next three years. However, it clearly has a viable path toward becoming a $2 trillion stock by 2025 as it stabilizes its advertising business and expands its margins again. Its nascent metaverse business could also finally take off, expand its ecosystem beyond its core apps, and diversify its top line away from the advertising market.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of February 5, 2024

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. Leo Sun has positions in Apple and Meta Platforms. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.

Will Meta Platforms Be a $2 Trillion Stock by 2025? was originally published by The Motley Fool

Share This Article
Follow:
Sarah Emerson holds a pivotal role at Vizionz Magazine, where her expertise and dedication contribute significantly to the magazine's success. Sarah is a dynamic and results-driven professional with a passion for the world of media and publishing. she brings a wealth of experience and a keen eye for detail to the helm.