Meta Platforms (NASDAQ: META) stock registered stunning gains of 140% in the past year, and this rapid surge has brought its market capitalization to $1.32 trillion. As it stands, the social media giant is now the world's seventh-largest company by market cap.
Another 52% jump in its share price could push Meta Platforms into the $2 trillion club. Let's try to find out if this tech giant could get to that milestone by the end of the decade.
Meta Platforms is set to take advantage of a lucrative growth opportunity
Meta ended 2023 on a solid note. Its fourth-quarter revenue increased 25% year over year to $40.1 billion, while earnings tripled to $5.33 per share. Consensus estimates project a 17.5% increase in the company's revenue in 2024 to $158.5 billion, which will be slightly higher than the 16% top-line growth it clocked in 2023. Also, as the following chart indicates, Meta expects to clock annual revenue growth of 12% in 2025 and 2026 as well.
META Revenue Estimates for Current Fiscal Year data by YCharts
However, a closer look at the company's recent growth tells us that it could do better than what analysts are expecting from it, especially considering that Meta is now cornering a bigger share of digital ad spending.
In 2023, digital ad spending increased by 10.7%, according to eMarketer. Growth is expected to accelerate to 13.2% this year. Meta's growth in 2023 and its projected growth this year suggest that its position in the digital ad market is improving. That's good news for Meta investors as the digital ad market, which was worth an estimated $420 billion in 2023 as per Grand View Research, could grow at an annual rate of 15.5% through 2030 and generate revenue of $1.15 trillion at the end of the decade.
Meta Platforms' advertising revenue of almost $132 billion in 2023 suggests that it controlled just over 31% of the digital ad market. A similar market share in 2030 would send Meta's ad revenue to almost $358 billion. Assuming that's all the revenue Meta generates in that year and it trades at 6.5 times sales (in line with its five-year average sales multiple), its market cap could exceed $2.3 trillion by the end of the decade.
In simpler words, Meta can get into the $2 trillion market cap club by 2030 if it simply matches the growth of the digital ad market. But then, there is a good chance that Meta can keep gaining market share in digital advertising thanks to the integration of artificial intelligence (AI) tools.
The company claims AI tools are driving a 32% average increase in return on advertising dollars spent. Moreover, Meta points out that using AI is helping reduce the cost of acquiring a customer by 17%. At the same time, generative AI is enabling Meta's customers to quickly create ad campaigns. Advertisers now don't need to go through lengthy steps to create campaigns, which can now be done with a simple generative AI prompt.
Meta Platforms started rolling out generative AI tools for advertisers in October last year. It expects to complete the global rollout of these features this year, indicating that more advertisers could get access to the company's AI tools. As a result, there is a good chance that more advertisers could flock to Meta's advertising tools, especially considering that it ended 2023 with a massive monthly active user base of 3.98 billion across its family of applications.
As such, the $2 trillion market cap milestone could arrive for Meta much before 2030. A closer look at the company's potential bottom-line growth indicates something similar.
Stronger bottom-line growth points toward solid stock price upside
Analysts expect Meta's earnings to increase at an annual rate of 24% over the next five years, up from the 10% bottom-line growth it has clocked in the past five years. Meta generated $14.87 per share in earnings in 2023, and the following chart indicates that it is set to maintain a healthy earnings growth rate over the next three years.
META EPS Estimates for Current Fiscal Year data by YCharts
Assuming Meta's earnings do indeed jump to $26.51 per share in 2026 and the stock trades at the Nasdaq-100 index's earnings multiple of 31 at that time (using the index as a proxy for tech stocks), its stock price could jump to $822. That would be a 56% jump from current levels, which would be enough to propel Meta Platforms into the $2 trillion club.
Given that the stock currently trades at 34 times trailing earnings, it isn't very expensive when compared to the Nasdaq-100 index. That's why investors should consider buying this tech stock before it adds to the impressive 46% gains it has already clocked in 2024.
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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. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
