Investors should take notice when billionaires continue to add to their top holdings. This indicates that their top pick is either attractively priced or has the potential for massive growth.
Steve Mandel's firm, Lone Pine Capital, has clear confidence in Meta Platforms (META +0.37%). The firm added 146,000 shares to its stake in Meta, which is valued at over $100 million at today's prices. That brings its total stake to nearly 9% of its investing portfolio, with a position size of $1.19 billion.
Clearly, that's a bullish bet on Meta, but what does Mandel see in the stock that makes him so bullish?
Meta Platforms' social media cash cows fund its AI development
Meta Platforms is probably better known for the social media properties under its umbrella: Facebook, Instagram, Threads, WhatsApp, and Messenger. From an advertising perspective, these platforms have been unbelievably profitable, generating $47.3 billion in the fourth quarter. It converted $28.3 billion of that into operating profit.
This means that Meta posted an outstanding 61% of its revenue in operating profits. Few businesses can match the profitability of Meta's social media platforms, and none can match its scale and profitability.
NASDAQ: META
Key Data Points
If you consider its social media platforms alone, Meta is undoubtedly one of the world's most powerful companies from a financial standpoint. However, Meta CEO and founder Mark Zuckerberg is unsatisfied with its social media market share; he also wants to capture the virtual reality (VR) and augmented reality (AR) market. Additionally, Zuckerberg sees huge potential in artificial intelligence (AI), so the company is spending massive amounts of money on building out AI infrastructure.
For 2025, Meta expects to spend around $60 to $65 billion on capital expenditures, which will mostly go toward building out AI computing capacity. This spending is one reason some investors aren't fans of Meta's stock, as it could be returning huge piles of cash to shareholders through dividends and share purchases.
However, this is the right move, and it solidifies the long-term trajectory of where Zuckerberg is steering Meta. He believes 2025 will be a pivotal year for AI, as he thinks it will be possible to build an AI engineering agent with the same problem-solving capability as a good mid-level engineer. If Meta can build out this AI agent first, it will open up a massive market unaccounted for in the stock's current valuation. Additionally, this will help boost the development work on some of Meta's other projects, like their Orion AR glasses.
Meta has an incredibly strong base business fueling its AI research, which is a great position to be in. It's still generating a massive profit, which also satisfies investors in the short term. But is the stock still a buy now? After all, Lone Pine Capital's investing moves, which we're just now learning about, happened no later than Dec. 31.
Meta's stock is starting to become a bit pricey
Meta's stock has had an incredibly strong 2025, rising more than 20% in under two months. This may concern investors that the stock has risen too much to take a position in, but I think that's short-sighted thinking. Meta is making all these investments now to secure the future state of the business years down the road. So, investors must decide whether the slightly higher price they pay now will pay off later.
Meta's stock is trading for 28 times forward earnings, the highest valuation it has been at in some time.
META PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio.
But the question remains: Is this price worth paying? I'd say yes. Compared to some of its peers, Meta's stock is still cheaper. Companies like Apple and Microsoft trade for 33 and 31 times forward earnings, respectively. So, Meta's valuation isn't out of line with any of its big tech peers, even though it is still expensive in general terms.
Given Meta's social media dominance and strong position in the AI arms race, I'd say the stock is still worth buying here, although it's nearing a point where I will consider holding on to my shares rather than adding any more. Meta Platforms is set to have a monster 2025, and the stock has risen in anticipation. But there's still just enough value here that it's worth buying today.
