Meta Platforms (META) is positioning itself prominently in the field of AI technology through recent advancements in open-source large language models (LLM) and by integrating AI into its existing product suite. Traditionally, companies such as OpenAI have been front-runners in AI innovation. However, Meta’s LLaMA 2 models have garnered significant attention for their competitive performance in various benchmarks. Meta’s deliberate focus on monetizing these AI tools across platforms such as Facebook, Instagram, and WhatsApp provides it with a distinct competitive edge. This dedication to generating revenue from AI differentiates Meta from other firms that are still exploring AI potential without clear monetization strategies.
Reviewing Meta’s performance reveals strong results, recently surpassing a key resistance level at $545. Furthermore, the relative outperformance compared to the S&P 500 confirms this breakout to new all-time highs. With ongoing positive momentum and strong support, Meta appears poised for further growth, particularly as it continues to innovate and integrate AI technology. The company exhibits robust growth projections with an anticipated future EPS growth of 22%, compared to the industry average of 16%, and a revenue growth rate of 15%, above the industry average of 11%. Meta’s exceptional profitability, highlighted by a net margin of 34% versus the industry average of 24%, further sets it apart.
Based on these growth and profitability metrics, Meta appears undervalued, presenting an attractive risk/reward profile for long-term investors interested in its AI-driven revenue potential. To leverage Meta’s projected upward potential while mitigating risk, investors may consider selling a Nov 15 $575/530 put vertical spread at a $16.87 credit. This involves selling the Nov 15, 2024 $575 put for $31.45 and buying the Nov 15, 2024 $530 put for $14.58. This strategy is advantageous if Meta remains above $575 by expiration. The maximum potential reward is $1,687, with a maximum risk of $2,813, presenting a solid risk/reward profile. The breakeven point for this trade is $558.13, meaning losses would commence only if Meta closes below this level by expiration.
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