Meta Platforms (META 3.77%) has been a fantastic investment historically. Despite bouts of gut-wrenching volatility, shares of the tech titan have skyrocketed 1,150% since their initial public offering (IPO) in late 2012. This gain easily outpaces the broader S&P 500.
Existing shareholders, as well as those who might not have ever owned this "Magnificent Seven" stock, might be wondering if Meta has the potential to make them a millionaire in the future. If getting to a seven-figure net worth is your goal, then continue reading to see if this company's shares deserve a place in your portfolio.
Dominant tech enterprise
One sign of a great business is the presence of an economic moat, a single trait or combination of traits that protects a company's industry position, while at the same time allowing it to produce strong fundamental performance for extended periods. Meta easily falls into this category.
The business operates some of the most successful social media apps on the planet, in Facebook, Instagram, WhatsApp, and Messenger. In total, these services had a combined 3.24 billion daily active users as of March 31. That's a truly gargantuan sum, representing 40% of the world's population. But the figure was still up 7% year over year.
These apps also benefit from powerful network effects. With more users, the service becomes more valuable to everyone. Anyone with technical know-how and some funding could probably launch a new social media site in no time. But to achieve the broad adoption that Meta has would be a near-impossible task.
This situation has created a financial juggernaut. Meta registered $135 billion in revenue in 2023, mainly from digital advertising, a 16% jump from the year before. The company produced $47 billion of operating income last year, good for a stellar 35% margin.
There's no reason to worry about Meta losing its standing anytime soon. Management touts strong engagement trends, an encouraging sign given the rise of TikTok.
And Meta is focused on its artificial intelligence (AI) initiatives. The business is investing aggressively in building out servers and data centers that provide the infrastructure that can improve the experience for both users of its apps and the advertisers that depend on Meta to target large audiences. This should keep the company in a favorable position for a long time.
NASDAQ: META
Key Data Points
On the road to $1 million
If someone were lucky and smart enough to have invested $81,000 at Meta's (then called Facebook) IPO price of over $38, their holding would be worth an astonishing $1 million today. This translates to a more than 12-fold gain.
Today, the company carries a massive market cap of $1.2 trillion. This makes it the world's seventh-most valuable business. That scale means Meta's forward returns will undoubtedly lag what was achieved in the past. As a company gets larger, it becomes more and more difficult to drive meaningful growth that moves the needle.
However, I still think Meta looks like a smart investment candidate. Despite its size, the stock trades at a forward price-to-earnings ratio of 23.9. That's a reasonable valuation to pay for a business as competitively advantaged as this one.
According to Wall Street consensus analyst estimates, Meta is expected to grow its revenue and earnings per share at compound annual rates of 14.1% and 20.5%, respectively, between 2023 and 2026. Take these forecasts with a grain of salt, but you get an idea of the company's potential.
Investors who are willing and able to put more money to work buying Meta's stock, while also having a longer time horizon, are in a good position to become millionaires from this social media and digital advertising powerhouse.
