Hedge fund manager Dan Niles is particularly bullish on one tech stock heading into 2025. That stock is Meta Platforms (META.O). Niles, who manages an active fund of 20 to 40 large-cap U.S. stocks at Niles Investment Management, highlighted the company's effective use of artificial intelligence in its internal platforms.
He explained that, for example, Meta is able to predict which videos and ads users want to see through AI algorithms. "This has led to better revenue and profitability for the company... They exceeded expectations for revenue, exceeded earnings per share (EPS) last quarter," Niels told CNBC in an interview on October 3 (during Asian trading hours).
His comments came on the back of Meta's second-quarter results beating Wall Street expectations, with the company reporting earnings per share of $5.16 versus $4.73, and revenue of $39.07 billion versus $38.31 billion. The tech giant guided for third-quarter revenue of $38.5 billion to $41 billion. While Meta's stock has experienced some volatility over the past few days, it is still up 63% year to date.
Meta is one of the so-called "Big Seven" stocks that multiple investors have taken a positive stance on this year. Other stocks on that list include Alphabet (GOOGL.O), Amazon (AMZN.O), Apple (AAPL.O), Microsoft (MSFT.O), Nvidia (NVDA.O) and Tesla (TSLA.O). Niels noted that Meta "really is the company with the best internal use of artificial intelligence." The veteran investor describes his investment style as seeking "growth at a reasonable price" while hoping to "see returns from AI." He expects the tech giant to benefit from the upcoming "hotly contested" U.S. presidential election in November, when there will be "a lot of advertising spending."
“What’s really nice is you can get it at a much higher multiple than the market, it’s much better growth than the market and it’s the best company using AI. So that’s why after taking all of these different factors into account, I remain bullish on Meta for next year because of the reasonable valuation, the good growth and the opportunity in AI,” Niles added.
According to FactSet, of the 69 analysts covering the stock, 59 have buy or overweight ratings, eight have hold ratings and two have underweight or sell ratings. The average price target for the stock is $588.61, which suggests 2.8% upside potential.
In addition to Meta, Niels is also keeping an eye on chipmaker Nvidia. The AI darling continues to be in the news, with its stock up nearly 140% this year. Niels calls it a "high-quality stock" and says "it's not just the chips they provide, but the more important thing that people don't spend enough time paying attention to, which is software." He is particularly optimistic about the potential of CUDA, a GPU programming language developed by Nvidia that further consolidates its dominance in the AI chip market.
Nvidia CEO Jensen Huang has “done a great job of getting [CADA] out to universities and so on, getting every engineer comfortable with it, and as a former engineer, once you get used to something, you don’t want to switch,” Niles said. “Coupled with the fact that they have the best hardware on the planet, they’re going to be at the forefront of this space for a long time, and I think it’s going to be hard for anyone to replace them.”
According to FactSet, 60 of the 65 analysts covering the stock have a buy or overweight rating, while only five have a hold rating. The average analyst price target is $149.54, which represents a 25.8% upside potential.
The article is forwarded from: Jinshi Data
