Both companies I write about today have been ditched by the markets as fears of an AI bubble and too much CapEx will ultimately kill their business. Gpus, Cpus, HBMs, Xpus are all in high demand and have been oversubscribed at least until the end of this year (some even more than that). Anyways…
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Meta is an technology company who make their money selling advertising through its suite of apps. It maintains high margins, strong products and exceptional returns. It is trading under its fair value historically and within its sector. It also has some cash for acquisitions or buybacks.
How it plans to grow?
- Selling AI Compute and Models
2. Hyper-Optimized Advertising and integration of AI
3. Monetizing New Platforms: rollout of threads
4. Subscription Services: Subscription tiers and premium AI features for Instagram, Facebook, WhatsApp
5. Wearables: Expansion of Ray-Ban smart glasses and VR headsets
Sales and revenues have been growing at 25% a year for years now. Wall Street and market intelligence firms project Meta’s annual ad revenues will reach $268B in 2027, with projected earnings-per-share growth of approximately 19.3%
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Microsoft is a technology behemoth encompassing a lineup of applications used worldwide and are critical for many businesses.
MSFT is undervalued historically and within its sector with a forward P/E for 20 and has a guidance of 15% EPS growth in FY27. It plans to expand its Cloud and AI business Azure as well as fulfill its commercial Remaining Performance Obligations of $627b (outside of OpenAI RPO grew at 26%) which have a weighted duration of 2.5 years. Roughly 25% will be recognized in revenue in the next 12 months and the remaining portion beyond the next 12 months.
Microsoft plans to grow through AI adoption, expansion of its cloud business and return of growth to its mundane personal computing.
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*I own and recommend shares of META and MSFT*
Devlin Demontigny 