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Meta’s Share Price Passed $500: Here's How It Surges Past $1,000

Eric Bleeker

Published: July 10, 2024 4:49 pm

Last Updated: July 10, 2024 4:58 pm

Meta Platforms (Nasdaq: META) is up more than 50% year-to-date and more than 500% since bottoming in November 2022. With shares now past $500, the question is just how high Meta shares can reach in the coming years. Today we’re going to explore how Meta managed to surge from less than $100 per share to $500 in less than two years and then run the numbers on what kind of performance Meta needs to deliver to hit $1,000 per share.

Key Points In This Article

• Meta has executed a successful transition from pitching investors on the metaverse being its future to AI being its next big growth market.
• Meta currently trades for 22X forward earnings while NVIDIA, Apple, Microsoft, and Amazon trade for between 32X to 35X earnings.
• Keys to reaching $1,000 per share include continuing to drive gains from AI and a path toward $85 billion in annual profits by 2028.
• Our brand-new "The Next NVIDIA" report dives deep into AI winners beyond Meta. Make sure to grab a complimentary copy if you’re interested in discovering more high-upside ideas in this massive trend.

The Reasons Why Meta Sank Below $100 Per Share

Before we go any further, it’s important to explore why Meta shares bottomed below $100 per share. There were three primary factors.

• Declining Sales: Like many companies, Meta saw record sales and earnings growth during Covid. Of course, we now know a lot of this growth was “pulling demand forward,” which meant that year-over-year growth in the second half of 2022 sunk. After sales growth hit 55% in the second quarter of 2021 it rapidly sank before bottoming out at -4.5% in the third quarter of 2022. Today, sales growth has surged back to 27%.
• Ballooning Expenses: Meta’s sales drop in late 2022 was bad, but its earnings drop was disastrous. By the fourth quarter of 2022, earnings were dropping 54.8% year-over-year. The company had overhired during Covid and was also spending massive amounts building out its data centers. Throughout 2023 Meta moved to reduce hiring and trim headcount, cutting billions in annual expenses and returning the company to profitability growth.
• Metaverse Fiasco: Meta’s huge investment in data centers looked particularly unforgivable in late 2022. At the time the company was pitching the Metaverse as its future, and its efforts had little traction. Investors were worried that Meta was spending obscene amounts of money chasing a market that didn’t exist.

Today that investment suddenly looks very savvy thanks to Meta pivoting from Metaverse to AI as the technology it’s most focused on.

Meta spent incredible amounts to hoard NVIDIA (Nasdaq: NVDA) GPUs before they became almost impossible to purchase in the second half of 2023. It has used those GPUs not only to train its leading Foundational AI model (Llama), but now uses AI for half its content recommendations. Wall Street estimates recently put the incremental revenue Meta will receive from AI this year at $16.3 billion.

As you can see, Meta had incredible challenges at the end of 2022 but has largely addressed them all.

How Meta Compares to the Rest of the Magnificent 7

Even after its incredible share gains in the past 18 months, Meta is still worth less than its Magnificent 7 peers aside from Tesla. Here’s how it compares to other large technology companies.

First of all, it’s worth noting how astounding the financial performance of all these companies has been. With AI appearing to strengthen their competitive positions, it is no surprise investors have flocked to these stocks.

(Also, remember to grab a copy of our "The Next NVIDIA" report if you’re looking for more stock ideas in this booming market.)

The most “obvious” metric that jumps out from this chart is thatMicrosoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), NVIDIA (Nasdaq: NVDA), and Amazon (Nasdaq: AMZN) are all trading for 32X to 35X forward P/Es while Meta (and Alphabet) are trading at 22X, which isn’t much of a premium to the S&P 500’s forward P/E, which currently stands at about 21X.

From this perspective, the clearest path to Meta shares hitting $1,000 is its forward P/E trading more in line with peers. Let’s take a look at how that could happen.

The Path to $1,000 Per Share

So, how does Meta hit $1,000 per share? Let’s look at a few key catalysts that could push them there:

• Shares Re-Rate to 30 to 35X Forward Earnings: As noted earlier, Meta trades for 22X forward earnings while other large tech peers like Amazon, Microsoft, and Apple trade closer to 35X. Meta’s stock “re-rating” to a higher forward P/E isn’t unlikely if the market buys into the idea that growth will be meaningfully higher than current expectations. For example, Apple was trading for 25X forward earnings in April, but after it announced its Apple Intelligence AI features, its forward P/E surged to 32. If Meta traded for a 30X forward P/E today, its shares would be worth about $730.
• AI Continues to Drive Huge Improvements: As just noted, Apple successfully unveiling AI software led to a sharp increase in its share price. Meta has already seen its share price rise thanks to optimism around its AI efforts. Meta has two pathways in AI. First, it built its Llama model which won’t directly deliver much revenue but keeps it in the arm’s race of companies building foundational models that could one day lead to AGI. Second, Meta is seeing very meaningful revenue gains from its AI investments. Wall Street researcherBernstein recently estimated Meta's AI content recommendations are adding an additional $16.3 billion in annual revenue. Estimates for Meta’s revenue this year stand at $159 billion in sales, which is $24 billion more than last year. If $16 billion of those gains come from AI, you can see how meaningful the company’s AI efforts have gotten.
• Beat Consensus Revenue Estimates: Right now Meta is expected to grow sales by 13% in 2025, 12% in 2026, and 10% in 2026. Those growth rates pale in comparison to a company like Amazon, which partially explains why Meta is trading for a lower multiple. If gains from AI led Meta to deliver higher growth rates of 15% annualized across the next three years, it would end 2027 with $242 billion in sales and earnings of $85 billion to $90 billion. If you applied a 30X forward multiple to that level of profits, you’d get Meta trading at a share price north of $1,000 per share.