Stocks known as the "Magnificent Seven" -- a reference to the 1960 Western -- have driven the market higher in recent months. This group of standout technology stocks led the S&P 500 to a new record high, confirming we're in a bull market.
The excitement doesn't end here. Bull markets generally favor growth stocks, so these players could continue to thrive in the months and possibly years to come.
If you want to get in on the Magnificent Seven story, you don't have to buy shares of every one of these top companies, however. Adding even one or two to your portfolio could offer you a significant boost over time.
But which one to choose? Today, social media giant Meta Platforms (META -2.83%) makes a no-brainer buy -- even after its nearly 40% gain this year -- for the following three reasons.
Image source: Getty Images.
1. A commitment to artificial intelligence (AI)
Meta is investing heavily in AI with the idea of making the technology available through all of its products and services down the road. It's already starting, with features like Meta AI, an advanced conversational assistant available on the company's social media platforms. This is possible thanks to the company's large language model Llama, and Meta is now training the latest version -- Llama 3.
Meta sticks by its open-source software infrastructure, meaning its available for public use. This is a smart move as it may help the company perfect its technology (thanks to feedback) and become an industry leader as more and more people use its platforms.
The tech giant aims to have 600,000 graphics processing units (GPUs) on board by the end of the year to power its AI ambitions and has said AI will be the company's biggest investment area in 2024.
2. A solid moat that drives profit
AI could significantly lift Meta's profit down the road, but right now, the company's social media applications -- including Facebook, Messenger, WhatsApp, and Instagram -- are in the driver's seat. The company's moat, or competitive advantage, is so strong it's likely these apps will continue to generate revenue growth over time.
Advertisers flock to reach people by advertising on these apps, creating a solid revenue stream for Meta. The company's competitive advantage is that its apps are broadly used worldwide, and because of that, it's very difficult to switch to another platform. After all, many of your contacts may not be on that other platform. More than 3.1 billion people use at least one of Meta's apps every day.
Meta also benefits because its social media apps appeal to a broad range of people, from young to old. These people use these apps for both leisure and professional use. The company's AI developments may prompt users to spend more time on the apps -- making advertisers even more eager to spend their budgets there.
3. Shares are dirt cheap
Meta has grown earnings over time, thanks to the strength of its social media platform, which keeps advertisers coming back. Long-term prospects look promising for both the social media business and the addition of AI to the picture.
Analysts predict double-digit growth annually for the company over the coming five years, and Meta's revenue has steadily climbed through the years, reaching record levels. That makes today's valuation of 24x forward earnings estimates look dirt cheap, offering investors a great entry point.
It's important to remember that estimates used in the calculation are for next year, so this is a rather short-term view. This picture doesn't consider earnings potential further down the road -- at a time when Meta's AI projects may really take off.
All of this means that right now is the perfect time to get in on this Magnificent Seven stock. It has plenty of room to run, even after recent gains.
