Meta (WKN: A1JWVX) impressively demonstrated at Meta Connect 2024 how the company is further expanding its leading position through innovations in the areas of artificial intelligence (AI) and augmented reality (AR). But despite this impressive progress, the stock is currently undervalued. While the price is at $572, my analysis shows an upside potential of almost 10%. The question for investors now is: Why is Meta not fully valued by the market, and what opportunities does this create?
Meta Connect 2024: More than just VR and AR
Meta has long been more than just Facebook. The company is relying heavily on technologies of the future and demonstrated this impressively at Meta Connect 2024. Not only were the latest developments in VR and AR presented here, but also the company’s ambitious plans to make these technologies suitable for the masses. The newly introduced VR headset “Meta Quest 3S” is set to revolutionize the market with a price of $299.99. This price seems unbeatable for a technology that will become increasingly relevant in the next few years. Meta is thus taking a significant step towards opening up the broad market for VR and establishing itself as a leading provider in this area.
But Meta doesn’t just want to set new standards in the VR sector. The introduction of the new “Orion AR Glasses” in an early stage of development shows that Meta is continuing to push the boundaries of the technology. With innovative control technology such as electromyography (EMG), Meta wants to enable users to control the AR glasses hands-free.
The focus is on holography and a new type of control using hand gestures, supported by a bracelet. But it was also made clear that this technology is still years away from being ready for the market, and Meta plans to reduce costs before making it available to the general public. So I don’t expect a quick market launch. But the long-term potential of these glasses is immense, I think. Imagine if in the future you could control your smartphone with one thought – that’s exactly what Meta has in mind.
AI translation: a real game changer?
In addition to the advances in VR and AR, Meta has also made impressive progress in the field of artificial intelligence. AI translation technology showcased at Meta Connect 2024 could revolutionize the way we communicate around the world. Not only will it be possible to translate foreign language videos in real time, but the technology will even adapt the speaker’s lip movements to the target language – a feature that takes the quality of the translation to a whole new level.
Another highlight was the introduction of UFC champion Brandon Moreno as a brand ambassador for this technology. This underlines Meta’s strategy to increasingly position itself as a luxury tech company.
The long-term potential: AR as the next big trend
While the VR technology is impressive, I think Meta’s true potential lies in the area of augmented reality. Demand for the Ray-Ban Meta Smart Glasses was so high that they sold out faster than expected. This demand suggests that AR glasses could represent a huge market in the coming years. AR perhaps has the potential to change our daily lives just as much as the smartphone did a few years ago.
The Orion AR glasses could even replace the smartphone as our central technological device. Meta is working hard to develop technology that will fundamentally change our everyday lives. Imagine no longer having to hold a physical device to navigate, text, or watch videos. All of this could be happening right before your eyes.
How Meta stands out from its competitors
If you meta with other big tech companies like Alphabet or Tencent If you compare, it quickly becomes apparent that Meta has had a more impressive price development in recent years. Last year, the stock rose a whopping 92%, while Alphabet was only up 27% and Tencent was up around 45%.
However, Meta not only impresses with its strong price gains, but also with its impressive profitability. In the most recent quarter, the company reported an operating profit of $14.8 billion and an operating margin of 38%. This means that Meta is in a significantly better position than many of its competitors, who are also growing strongly but are often less profitable.
Meta generated an impressive $51.4 billion in net income in 2023, an increase of over 400% compared to 2016. Free cash flow was $49.5 billion, an increase of over 130% % compared to the previous year. These cash flows give Meta the flexibility it needs to continue investing into the future without jeopardizing its financial stability.
Another point in favor of Meta is the impressive capital return strategy. Last year alone, the company repurchased $41.5 billion worth of shares, underscoring management’s confidence in long-term performance. When a company buys back shares to this extent, it usually means that it views its own shares as undervalued – a good sign for you as an investor.
Is meta undervalued?
Yes! My analysis shows that the fair value of Meta stock is $625. The stock is currently clearly undervalued. The current price of $572 represents an interesting entry opportunity, especially considering the company’s growth forecasts.
According to my forecasts, Meta will be able to increase its sales from $188 billion to well over $500 billion over the next ten years. Net profit can grow to more than $180 billion over the same period.
My conclusion
With Meta Connect 2024, Meta demonstrated its innovative strength and continued to advance its ambitious plans in the areas of AI and AR. Despite this progress, my valuation shows that the stock is significantly undervalued. The share offers you an attractive return opportunity of up to 11% per year. Anyone who invests now can benefit from the company’s strong growth potential and solid cash flow development. Meta is on its way to $625 – now is the ideal time to take advantage of this opportunity.
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