What's the hottest FAANG stock on the market these days? It's not even close: Meta Platforms' (META 5.50%) shares have skyrocketed nearly 150% year to date, a gain that almost triples the performance of second-place Amazon.
More people are actively using Meta's social media platforms. Advertisers are spending more money on them, too. The company's profits are soaring thanks to these trends, as well as Meta's focus on cutting costs.
What's next for the tech giant? CEO Mark Zuckerberg recently weighed in on this question and, surprisingly, he didn't say the "next major pillar" of Meta's business would be the metaverse. Here's what has Zuckerberg excited at the moment.
NASDAQ: META
Key Data Points
Meta's next big business
In Meta's Q3 earnings call, Zuckerberg told analysts that the company's next major business will be ... business messaging. He was referring to businesses using Meta's technology to electronically communicate with their customers, partners, and other stakeholders (more on this below).
Zuckerberg views artificial intelligence (AI) as a key catalyst for its business messaging focus. He said in the conference call that AI should help Meta lower the cost of business messaging and "expand commerce in messaging into larger economies across the world."
This is an immediate priority for Meta. Zuckerberg stated, "[M]aking business AIs work for more businesses is going to be an important focus for us into 2024." He noted that the company has already begun testing AI-powered business messaging with a few partners. Zuckerberg added that Meta "will take our time to get the experience right, but we believe this will be a big unlock for business messaging in the future."
Over time, Zuckerberg believes that Meta will be able to "grow the business messaging business in a big way." However, he didn't make any predictions about just how much revenue this next major pillar for Meta's business might generate.
Not starting from scratch
Importantly, Meta isn't starting from scratch in creating this next major business. It acquired WhatsApp in 2014 for a whopping $19 billion. While people across the world use WhatsApp for personal messaging, business messaging has become an increasingly important service for the platform.
Most of Meta's revenue is currently generated from advertising. However, it also made $293 million in revenue from other sources in Q3, up 53% year over year. CFO Susan Li said that this impressive growth was "driven by strong business messaging revenue growth from our WhatsApp Business Platform."
Zuckerberg noted in the Q3 call, "Today, most commerce in messaging is in countries where the cost of labor is low enough that it makes sense for businesses to have people corresponding with customers over text. And in those countries, like Thailand or Vietnam, there is a huge amount of commerce that happens in this way."
He thinks that Meta's use of AI in business messaging could change the economic dynamics of the technology in other markets. Zuckerberg said that Meta plans to use AI to enable businesses to respond to messages from customers and potential customers in a cost-effective way.
Meta's other big growth opportunities
AI will be key to Meta's growth in other ways as well. For example, the company recently launched its Meta AI virtual assistant and its AI Studio platform. The technology is helping improve feed recommendations on Facebook and Instagram, boosting time spent on the platforms. Meta is using AI to help advertisers manage shopping campaigns. Zuckerberg said, "AI will be our biggest investment area in 2024."
Meta remains committed to the metaverse, too, despite increasing losses for its Reality Labs unit focused on virtual reality. Zuckerberg reaffirmed in the Q3 call, "[I]n addition to AI, our other major long-term focus is the metaverse." He mentioned the launch of Quest 3, Meta's most powerful virtual reality headset so far. The company also introduced its next generation of Ray-Ban Meta smart glasses. Meta has added new worlds to its Horizon metaverse and is testing expanding Horizon to mobile devices.
Even after its phenomenal performance in 2023, Meta stock is still valued attractively. Its price-to-earnings-to-growth (PEG) ratio is a low 0.68. If the company executes well on its growth strategies -- notably including its "next major pillar" of business messaging -- Meta should make investors a lot more money over the coming years.
