Investors in Meta Platforms Inc. (NASDAQ: META) are enjoying significant gains this year, with market attention currently turning to the upcoming Meta Connect 2024 conference to indicate the direction the company wants to take in the coming period. The event, which kicks off on Wednesday, is expected to include the unveiling of a prototype augmented reality glasses, as well as updates on the company's progress in artificial intelligence (AI).

A remarkable rise in stocks

Meta shares have seen a remarkable rise, up around 13% since the beginning of September[1], while also hitting an all-time high closing price last week. In a grouping often referred to as the "Brave Seven," only Nvidia Corp. has surpassed Meta, with Meta alone up nearly 60% in 2024.*

Benefits of AI integration

Michael Sansoterra, chief investment officer at Silvant Capital Management, noted that Meta is benefiting significantly from the practical application of AI technologies. "They are one of the few companies that can already achieve tangible benefits from AI integration," he said.

An opportunity for investors

The two-day conference presents a valuable opportunity for investors to gain insight into Meta's strategic direction in AI. With stocks currently trading at their highest levels yet, it is important that investors do not panic during a possible short-term downturn, which may not reflect fundamental issues, but rather an opportunity to buy at a discounted price. [1]

Any correction should respect the current internal bullish market structure, which will be valid until the price closes below the September low. In the event of a deeper decline, it will be possible to buy more until it closes below the external bullish market structure that formed its low in July.

The Historical Impact of the Connect Conference

Historically, the Connect conference has not been a direct trigger for immediate stock price volatility. However, it often provided predictability of Meta's results in the last quarter of the year. For example, two years ago, an event highlighted a new headset and developments in the Metaverse, which preceded a earnings report that disappointed investors due to the high level of spending. Similarly, last year's conference unveiled a number of AI initiatives, including Meta's AI assistant and social media chatbots, but subsequent quarterly results were met with investor dissatisfaction with ad revenue and continued large investments in AI and virtual reality.

Change in investor sentiment

This year, sentiment seems to have changed. Meta has seemingly convinced investors that its investments in new technologies will continue to generate returns. In the latest earnings call, CEO Mark Zuckerberg effectively argued that the company's investment in AI is improving its core business operations. This story contributed to stock gains that outperformed those of its tech peers.*

Analysts' growing optimism

Analysts' optimism about Meta is growing. Both Cantor Fitzgerald and DA Davidson began covering the company this month with a positive rating equivalent to "buy." Deepak Mathivanan, an analyst at Cantor Fitzgerald, called Meta the top pick, citing "potential for upward revisions to the estimate and attractive valuation." [2]

Attractive valuation for investors

The company's current valuation contributes to its appeal among investors, even with record high share prices. Meta is trading at around 24x its forward gains, which is closely in line with its ten-year average and slightly below the Nasdaq 100's ratio of 26x.* This valuation is also more favorable compared to the roughly 29x gain seen for the Magnificent Seven index. In the case of the aforementioned correction, the valuation would of course be even more advantageous.

Conclusion

As Meta Platforms Inc. prepares for its annual Connect conference, investors are eagerly awaiting a glimpse into the company's future, especially when it comes to AI development and new product offerings. This event could play a key role in shaping investor sentiment and influencing the trajectory of stocks in the coming months. Given the company's strong performance and strategic investments, Meta remains a focal point for investors looking for promising opportunities in the technology sector.

* Past performance is not a guarantee of future results.

[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

[1] Meta Platforms Inc.'s share price performance over the past five years: https://tradingeconomics.com/fb:us