META Stock Alert: There are still many reasons to be optimistic

Meta-platforms (NASDAQ:META) shares have stalled after the company’s recent financial results disappointed investors. But it may not be long before the stock price starts rising again.

Meta shares are trading 5 percent below their 52-week high today following a sell-off following the company’s release of first-quarter financial results.

While the company beat Wall Street’s revenue and profit forecasts, analysts raised concerns about the company’s plans to increase spending after a year of austerity and questioned some groundbreaking technology projects.

This caused many investors to exit META shares, but given Meta’s track record as a leading growth stock, this is a short-sighted approach.

Despite the post-earnings decline, Meta shares are up 45 percent this year and 84 percent over the past 12 months, making the company one of the best-performing megacap technology companies.

A strong pressure

META shares plunged 16% immediately after the technology giant released its first-quarter results.

The company’s capital expenditure forecasts and plans overshadowed an otherwise very strong quarterly financial report.

For the first quarter, Meta reported earnings per share of $4.71, compared to $4.32 expected by analysts. Earnings more than doubled from $2.20 per share in the year-ago period.

Revenue for the quarter was $36.46 billion, versus the expected $36.16 billion. Revenue increased 27% year over year, representing the fastest quarterly growth rate since 2021.

Unfortunately, this excellent report was overshadowed by the forecast, which predicted revenue of $36.5 billion to $39 billion for the current second quarter. The revenue forecast fell short of consensus estimates, which averaged $38.3 billion.

Increased spending

The sell-off in Meta shares accelerated during the conference call as CEO Mark Zuckerberg talked about growing investments in mixed reality and artificial intelligence.

The company’s capital expenditures are expected to be in the range of $35 billion to $40 billion for 2024, up from the previous forecast of $30 billion to $37 billion.

The increased spending is mainly due to rising spending on AI technologies, Zuckerberg said.

At the same time, the company’s Reality Labs unit, which houses the company’s hardware and software projects, reported a loss of $3.85 billion in the first quarter. Since 2020, Meta’s Reality Labs has lost $45 billion.

Reality Labs’ mounting losses overshadowed the fact that Facebook had a total of 3.24 billion daily users, up 7% from a year ago.

Advertising revenue, which makes up the majority of Meta’s business, also rose 27% to $35.64 billion in the first quarter.

First dividend payment

In addition to the strong growth of the entire company, the fact that the company announced its first dividend payment this year is another compelling reason to buy Meta shares.

Meta now pays its investors a quarterly dividend of 50 cents per share. The company has also launched a new share buyback program worth $50 billion.

Meta Platforms joins other megacap technology companies that pay dividends to their shareholders.

In addition to the dividend payment and share buyback, rumors are circulating that Meta Platforms could be the next tech giant to split its shares. NVIDIA (NASDAQ:NVDA) And Broadcom (NASDAQ:AVGO) have each announced stock splits in a ratio of 1:10 this year.

Since the stock price is currently above $500, a stock split is not impossible.

Buy Meta Stocks

Now is a good time to buy a position in Meta stock or add to an existing position. While the stock price took a hit following the company’s first-quarter results, it won’t stay down for long.

There is a lot to be said for Meta. Online advertising on social media sites is booming and AI offers great opportunities. The future looks bright for Meta Platforms.

If you add in a dividend payment and a share buyback, things are looking good for shareholders too. Meta shares are a buy.

On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.