Investing

Prediction: Meta Platforms Will Be a Top 5 Stock By Market Capitalization By 2026

Chris MacDonald

Published: November 8, 2024 10:30 am

Meta Platforms (NASDAQ:META) recently reached a record $1.5 trillion market value, seeing the value of its shares rise 66% in 2024 and 387% since early 2023. This incredible move has positioned the social media giant as a top growth stock investors continue to focus on as a long-term winner. Indeed, those who bought shares of the once-Facebook at its IPO and have held to today have certainly felt the impact of the long-term growth trends within the tech sector overall.

Meta Platforms rebranded from Facebook in a bid to diversify its long-term strategic vision to one that includes the Metaverse. The company has since shifted focus once again on where the future lies, investing heavily in the AI revolution. No one really knows what this stock truly is going to be down the road, but one thing is certain – the company’s core social media empire which includes Facebook, Instagram and WhatsApp has continued to provide steady cash flow growth that has allowed the company to invest its enormous cash pile into other growth areas with major upside potential.

Thus far, investors like where the company is headed, particularly with last year’s shift to focus on efficiency. Let’s dive into whether this momentum can continue, and the bull case behind what could make Meta a top-3 stock by market capitalization over the next two years.

Key Points About This Article:

• Meta Platforms remains among the top social media and tech giants many investors believe could become a top stock in most indices over the next two years.
• Here’s the bull case behind what may be required in order for Meta to breach such a market capitalization level.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

An AI Game-Changer?

Meta Platforms’ shift toward artificial intelligence has been well-noted. The company is investing heavily in AI, acquiring the equivalent of 100,000 GPUs this year for training its Llama 4 model. While smaller Llama 4 models are expected early next year, CEO Mark Zuckerberg noted that monetizing these efforts will take time, with increased AI spending anticipated in the upcoming budget. Although this strategy may concern some investors due to potential short-term earnings impact and the risk of overbuilding capacity, Zuckerberg has continued to emphasize the importance of developing the necessary infrastructure. For now at least, the more the company spends, the greater the market rewards these endeavors.

I do think the company has significant operating leverage potential in terms of its ability to integrate its AI applications into its existing user base. The fact that nearly half of the world uses one of Meta’s platforms each day (around 3.2 billion daily active users) means there are plenty of eyeballs to go around when it comes to utilizing AI on one of its applications. If the company can successfully herd the crowd toward its AI products, and dominate the world of consumer AI, this is a company that could actually be undervalued in its current state. That’s the bull case at least.

Right now, we know that these endeavors in creating the consumer-facing AI company of choice for users is going to be a very expensive endeavor. However, this is a bet the market is clearly cheering, and the underlying performance from Meta’s core businesses supports this spend. If Meta can come out of this race as a clear leader, this is a stock AI investors will certainly want to hold over the long-term.

It’s All About Revenue (And AI)

Continuing with the AI discussion, investors are closely parsing through the company’s quarterly earnings to get any sort of indication as to what the company’s AI investments may portend for revenue and earnings growth.  Thus far, results have been strong, with Meta reporting stronger-than-expected Q3 results driven by advertising revenue and AI initiatives. Now, the company did warn of a significant rise in infrastructure spending for AI development next year. However, until the market punishes Meta for spending too much on its artificial intelligence-led future, there’s no indication this spending will stop. 

Meta’s average daily active users reached 3.29 billion in September, slightly below the 3.31 billion anticipated by analysts. That said, despite this slowing growth in overall users (there’s only so much market share one company can get before they encompass the entire world), Meta has clearly done an excellent job of monetizing its existing base. The company’s earnings per share surged 35% year-over-year to $4.39 per share this past quarter, on revenue growth of just 19%. Thus, the company is becoming more profitable (and as CEO Mark Zuckerberg has hoped, more efficient).

So long as AI can be used as a tool to further improve the company’s monetization efforts, the investment could be well worth the money. We’ll have to see how this all turns out. But for now, concerns around rising development costs and forward guidance appear to come second place to the company’s ability to grow its revenue and earnings. On those fronts, Meta is clearly winning the battle among its social media peers.

Growth Continues to Come In Strong for Meta

I think Meta will continue to be a growth story, and until this growth slows down, its valuation will continue to remain robust. At the time of writing, Meta’s market capitalization stands at around $1.5 trillion, with the third-largest company by market capitalization (Microsoft) being worth more than $3.1 trillion. Thus, holding a thesis that Meta could become a top-3 stock by market capitalization would require a more than doubling of its share price over the next two years (holding other companies’ market cap growth steady). More realistically, Meta may need to triple over this time frame.

Over the past three years, Meta has done more than that. And again, if the company can utilize AI to ramp up its revenue and earnings growth further, anything’s possible.

I’m of the view that a top-3 position in the market may not be likely for Meta over the next two years. But I’m also a realist, and believe it’s certainly within the realm of possibility. If I had to put money on it, I’d say a top-5 position is certainly within reach (in my mind, more likely than not), but the other mega-cap tech companies on this list certainly have blistering growth of their own, with their own AI ambitions. We’ll have to see how this market cap race turns out, but for now it’s a compelling race to watch.