This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Like many companies, Meta Platforms (NASDAQ: META) started 2025 splendidly, performing well through the first few weeks of the year. And like many of its peers, the tech giant's shares have dipped in the past month due to a combination of factors, with President Trump's trade wars playing a prominent role.
Though it might be tempting to avoid the stock as the market remains volatile, Meta Platforms looks attractive to buy and hold for a while despite near-term uncertainty. Let's consider three reasons to invest in the company.
1. It is doubling down on artificial intelligence
The artificial intelligence (AI) field looks incredibly promising. Amazon CEO Andy Jassy wrote in a recent letter to shareholders, "Generative AI may be the largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet."
While several AI companies are grabbing most of the attention, Meta Platforms looks like a notable player in the space. Several years ago, it launched an AI assistant, Meta AI, and its family of large language models (LLMs), called Llama.
Management hopes Llama will become the most used open-source LLM this year; meanwhile, Meta AI has more than 700 million monthly active users. The impact of AI on the company's financial results has been limited since much of its efforts are available for free. Perhaps we can point to the company using AI-powered algorithms to drive greater engagement on its websites and apps, leading to higher ad revenue.
Its AI monetization efforts might be in their early innings, but management sees the potential and plans to pursue this opportunity. CEO Mark Zuckerberg says Meta will invest hundreds of billions of dollars in AI infrastructure. It could see rich dividends from its current AI-related initiatives, considering the trajectory of the industry and the company's already notable work in the field.
2. It has an unparalleled ecosystem of users
One of Meta Platforms' greatest strengths is its large installed base of people who use at least one of its websites or apps daily. The company ended 2024 with 3.35 billion daily active users, a 5% year-over-year increase.
It benefits from the network effect. Consider Instagram, an app that allows people to keep in touch with friends and family members, influencers to attract a large following, and companies to advertise their products. The more users it has, the more valuable it becomes to those on the outside looking in.
This network effect means it likely to remain the leading social media platform for the foreseeable future. So, companies will continue to pay small fortunes to launch targeted ads.
Meta Platforms is also looking for ways to monetize its deep ecosystem. It has launched initiatives such as paid messaging on WhatsApp. And it is still working on its metaverse ambitions, which could provide another meaningful revenue source. As long as the company attracts billions of users daily, there should be more initiatives in the future.
3. It is reasonably valued currently
Investors can also buy the stock at prices that do not look prohibitively expensive, judging by traditional valuation techniques. The company's forward price-to-earnings (P/E) ratio is 23.5.
META PE Ratio (Forward) data by YCharts.
True, that's higher than the 18.1 average for the communication services sector it belongs to, but Meta's higher forward P/E multiple is well justified considering its excellent financial results and strong prospects. And as a bonus, it is now a dividend payer, having initiated a quarterly payout last year.
Meta Platforms may or may not go on to become an excellent income stock; only time will tell. But the payout certainly will not make it less attractive. And the company's many growth avenues -- including AI, its strong competitive advantage, and massive ecosystem of users -- make it an exciting long-term option.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
