Latest Developments:
Meta Platforms (META) reported 2Q24 revenue of $39.07 billion, up 22.1% YoY. The advertising business remains robust, with 9% growth in ad impressions and a 10% rise in ad pricing. However, margins declined due to rising expenses. The company continues to invest heavily in AI, with capital expenditure reaching $15.18 billion YTD. Despite AI and AR/VR potential, monetization remains uncertain.

Investment Case:
While Meta’s advertising business shows strength, its stock price has surged 67% YTD due to AI optimism. However, the market has priced in aggressive growth, with a DCF model suggesting an annual growth rate of 37.8%. Given the uncertainty around AI monetization, any shortfall in growth could lead to a significant correction.

Company's Valuation:
Meta’s valuation is highly optimistic, with the current share price implying nearly 40% annual growth, which is unsustainable based on historical growth rates of 11%-24%. Investors should wait for clearer insights into AI monetization before making investment decisions.

Disclaimer: The above is an excerpt on a report written by our close associate, Selendis Research. Check out the full report here on Seeking Alpha. All information provided is intended solely for general informational purposes. Seven Insights does not take into account individual financial goals or situations and does not provide personalized investment advice. Seven Insights is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank.