What are the hottest FAANG stocks in the market these days? It’s not even close: Meta platforms‘ (META 2.10%) shares have soared nearly 150% year-to-date, a gain that nearly tripled the second-place performance Amazon.
More and more people are actively using Meta’s social media platforms. Advertisers also spend more money on them. The company’s profits are growing thanks to these trends, as well as Meta’s focus on cost reduction.
What’s next for the tech giant? CEO Mark Zuckerberg recently commented on this issue, and surprisingly, he didn’t say that the “next major pillar” of Meta’s business will be the metaverse. Here’s what Zuckerberg is excited about right now.
Meta’s next big business
On Meta’s third-quarter earnings call, Zuckerberg told analysts that the company’s next big business will be … business messaging. He was referring to businesses using Meta’s technology to communicate electronically with their customers, partners and other stakeholders (more on that below).
Zuckerberg sees artificial intelligence (AI) as a key catalyst for his focus on business messaging. He said on the conference call that AI should help Meta lower the cost of business messaging and “expand messaging across larger economies around the world.”
This is an immediate priority for Meta. Zuckerberg stated, “[M]making business AI work for more businesses will be an important focus for us in 2024.” He noted that the company has already begun testing AI-based business messaging with several partners. Zuckerberg added that Meta “will take 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 did not make any predictions about how much revenue this next major pillar of Meta’s business could generate.
It doesn’t start from scratch
The important thing is that Meta is not starting from scratch in creating that next big business. It acquired WhatsApp in 2014 for a whopping $19 billion. While people around the world use WhatsApp for personal messaging, business messaging is becoming 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 Lee said this impressive growth was “driven by strong growth in business messaging revenue from our WhatsApp business platform”.
Zuckerberg noted on the Q3 call, “Today, most of the messaging business is in countries where the cost of labor is low enough that it makes business sense to have people texting customers. And in those countries, like Thailand or Vietnam, there’s a huge amount of trade that happens that way.”
He believes Meta’s use of AI in business messaging could change the economic dynamics of the technology in other markets. Zuckerberg said Meta plans to use AI to allow businesses to respond to messages from customers and prospects in a cost-effective way.
Other great growth opportunities for Meta
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 helps improve feed recommendations on Facebook and Instagram by increasing time spent on the platforms. Meta uses AI to help advertisers manage shopping campaigns. Zuckerberg said: “AI will be our biggest investment area in 2024.”
Meta also remains committed to the metaverse, despite mounting losses for its Reality Labs division, which focuses on virtual reality. Zuckerberg reaffirmed on the Q3 call, “[I]In 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 to date. The company also unveiled its next-generation Ray-Ban Meta smart glasses. Meta added new worlds to its Horizon metauniverse and is testing Horizon’s mobile expansion.
Even after its phenomenal performance in 2023, Meta stock is still attractively valued. Its price-to-earnings-to-growth (PEG) ratio is a low 0.68. If the company executes well on its growth strategies — especially including the “next major pillar” of business messaging — Meta should make investors a lot more money in the coming years.
John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Randy Zuckerberg, former Facebook CMO and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon and Meta Platforms. The Motley Fool has positions and recommends Amazon and Meta platforms. The Motley Fool has a disclosure policy.