As most investors know, Mark Zuckerberg is the CEO and co-founder of Meta Platforms (NASDAQ:META), which operates the world’s most profitable social media platform. He’s also the controlling shareholder with approximately 61.1% of the META stock votes.
Zuckerberg controls Meta through Class B shares, which have 10 votes per share, compared to one for Class A shares. The billionaire’s economic interest is based on 350.6 million Class A and Class B combined, representing an economic interest of 13.6% as of March 31, 2023.
Based on its current share price of $347, Zuckerberg’s META stock is worth $121.7 billion. According to the Bloomberg Billionaires Index, Zuckerberg’s total net worth as of Jan. 3 was $125 billion, putting him in seventh spot.
While his net worth has taken a $3.4 billion hit early in 2024, last year’s 194% return certainly helped cement his place in Bloomberg’s top 10 wealthiest billionaires.
Although it’s unlikely for META stock to deliver a second consecutive year of triple-digit returns in the year ahead, a sufficiently strong year in advertising should boost his ranking by at least a couple of positions.
Assuming no deep recession and interest cuts happen by the third quarter, I don’t think Meta will disappoint Zuckerberg or his faithful shareholders.
Here’s why.
AI Should Help META Stock
Like any good CEO, Zuckerberg paid attention to economic conditions in 2023 and determined that it had too many employees, was spending too much on the metaverse and other insignificant revenue generators, and needed to lean into artificial intelligence to deliver increased ad revenue and higher profits.
As a result, Meta cut 21,000 jobs, reduced its spending on the metaverse and everywhere else in the business, and focused on AI and what it could do for its social media platforms.
For example, in August 2022, the company launched Advantage+, several ad automation tools to help advertisers create and track ad campaigns. As Investor’s Business Daily reported in November, Advantage+ hit $10 billion in annual run rate revenue as of Sept. 30, 2023.
“Our AI tools for advertisers are also driving results with Advantage+ Shopping Campaigns reaching a $10 billion run rate and more than half of our advertisers using our Advantage+ Creative tools to optimize images and text in their ads creative,” Zuckerberg stated in its Q3 2023 conference call.
A $10 billion annual run rate might not seem like a big deal given Meta generated ad revenue of $33.6 billion in the third quarter alone, 23.5% higher than a year earlier, but it’s a step in the right direction.
In 2022, its ad revenue was $113.64 billion, a 1% decline from 2021. Through the nine months ended Sept. 30, 2022, it was $93.67 billion. On an annualized basis, that’s $124.9 billion, 10% higher than a year earlier.
As a result, its free cash flow is headed through the roof.
Free Cash Flow is King
The company’s free cash flow through the first nine months of fiscal 2023 was $31.51 billion, 140% higher than a year earlier. As a result, it ended the third quarter with net cash on its balance sheet of nearly $43 billion.
How many companies have this kind of balance sheet? Only a few. That’s even more than Apple (NASDAQ:AAPL), which finished its fiscal year on Sept. 30, 2023, with net cash of $38.2 billion, about $5 billion less than Meta, whose revenues are less than a third of Apple’s.
Meta’s free cash flow should finish 2023 at around $42 billion from a valuation perspective. Based on an enterprise value of $860.33 billion, it has a free cash flow yield of 4.9%. Anything between 4% and 8% is growth at a reasonable price.
According to Morningstar.com, Meta’s market cap of $892 million is 13.68x its cash flow from operations. By comparison, Apple’s multiple is 26.36, almost double Meta, whose growth is accelerating, while Apple’s is decelerating.
I’m a big fan of Apple, so I don’t think you should sell its stock if you own it, but you might redeploy some of your investment portfolio into Zuckerberg’s business.
So, to answer the question, “Will Meta Platforms Stock Push Mark Zuckerberg Higher in the Bloomberg Billionaires Index in 2024?” I would say, absolutely, yes, it will.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.