What a difference a year makes. In the economic turmoil that characterized 2022, Meta Platforms (META 0.68%) was hit hard. Marketers pulled back on digital ad spending -- which accounts for the lion's share of Meta's revenue. For the first time in its history, the company experienced three consecutive quarters of declining revenue growth, which sent its stock price plunging 64%.

However, a rebound in the ad market and excitement around artificial intelligence (AI) lit a fire under Meta Platforms last year, sending the stock up 194%. As impressive as its performance has been, this could be just the beginning.

Let's look at several factors that could play into a banner year for Meta Platforms and why there could be much more growth ahead.

Meta declares a "year of efficiency"

The macroeconomic landscape aside, one of the biggest contributors to Meta's improving outlook was the efforts it took last year to rein in spending, which CEO Mark Zuckerberg dubbed the company's "year of efficiency." Initially, management expected full-year 2023 expenses in a range of $94 billion to $100 billion. However, several revised estimates and much belt-tightening later, Meta's expenses for the year clocked in at just $88 billion -- which in turn helped boost the company's bottom line.

That, combined with the recovering digital advertising market, had a dramatic effect on Meta's recent financial results. For the fourth quarter, revenue of $40 billion marked 25% year-over-year growth, while its diluted earnings per share of $5.33 represented a 203% surge. Meta has already said it expects its full-year expenses to be higher in 2024, but existing cost controls have already set the stage for higher profits.

Management is so confident in the company's prospects that Meta declared its first-ever quarterly dividend of $0.50 per share, a yield of about 0.44%. Based on its 2023 results, that works out to a payout ratio of about 13%, which leaves plenty of opportunity for increases.

A recovery in digital advertising

It's well documented that when economic uncertainty hits, advertising is among the first areas of the budget to be cut -- and the bear market provided a prime example. During 2022, digital ad revenue grew roughly 11% year over year. While that seems respectable at first glance, it pales in comparison with the industry's 35% growth in 2021.

Global ad spending is expected to increase by roughly 8% to more than $1 trillion in 2024, according to data from ad industry researcher WARC Media. Social media is expected to be the fastest-growing digital advertising medium, accounting for nearly 22% of total ad spending, according to the report. The data highlights several of the largest digital advertisers -- including Meta -- suggesting the company is "on course to record oversized gains in the coming months."

It stands to reason that as the world's largest social media provider and second-largest digital advertiser, Meta is well-positioned to benefit from these secular tailwinds.

AI could boost Meta's ad revenue

There's been plenty of excitement surrounding the advent of generative AI. While many companies are researching ways to use AI to boost their productivity, Meta Platforms has already deployed the technology to increase the efficiency of its advertising -- which in turn could boost revenue.

Late last year, Meta announced that it was making a host of generative AI features available to all advertisers. This suite of tools can help create multiple backgrounds for ads, change the aspect ratio of images, or generate or change ad text to better target a specific audience. In early tests, Meta found that advertisers saved five or more hours per week because they could "create multiple asset [ad] variations with the click of a button." These innovations alone may attract additional advertisers and further boost ad revenue.

Raymond James managing director Josh Beck agrees and calls Meta "a little bit of [an] unsung hero" of AI. He specifically cites the "incremental monetization opportunities in advertising," which is right in Meta's ballpark. As a result, he believes Meta can grow at twice the rate of the overall ad industry in 2024.

Wall Street seems to agree, as analysts' consensus estimates call for revenue of nearly $157 billion in 2024, a 16% increase -- which is about twice the 8% growth rate the ad industry is expected to achieve this year. It's worth pointing out that Meta has made a habit of exceeding expectations, so these estimates could end up being conservative.

Finally, after it tripled last year, you might expect Meta's valuation to be stretched, but that's not the case. The stock is selling for 30 times earnings and 9 times sales, a slight premium to the overall market. However, its price/earnings-to-growth (PEG) ratio -- which factors in Meta's growth rate -- is less than 1, the standard for an undervalued stock.

Given the ongoing rebound in digital advertising, Meta's leaner cost structure, the AI wildcard, and the company's compelling valuation, it's not too late to buy Meta stock.