Meta Platforms (NASDAQ: META) is off to another great start. After rallying 194% in 2023, it’s already up another 30% through the early part of 2024, thanks to a strong earnings performance.
Does a strong start for the company normally indicate a good performance for the rest of the year? Here’s a look at how shares of Meta Platforms have done in the past, after coming off a strong first month.
Meta’s impressive start isn’t all that surprising
Meta Platforms went public in May 2012, when its company name was still Facebook. Since then, it generated a return of 10% or better in January in six of the following 12 years, often as a market-beating stock.
Through a combination of organic growth and acquisitions (WhatsApp, Instagram), Meta Platforms is a dominant social media company — it has nearly 4 billion people using its applications every month. It is now one of the most valuable businesses in the world, with a market cap of $1.2 trillion.
Does a big month in January lead to big returns for the rest of the year?
Here’s an overview of the last five times Meta’s stock jumped by at least 10% in January.
|
Year |
January Return |
Annual Return |
Returns After January |
|
2023 |
23.79% |
194.13% |
137.60% |
|
2019 |
27.16% |
56.57% |
23.13% |
|
2017 |
13.27% |
53.38% |
35.41% |
|
2014 |
14.49% |
42.76% |
24.69% |
|
2013 |
16.38% |
105.30% |
76.40% |
Data source: Google Finance. Calculations by author.
In each of those five years, the tech stock would go on to finish with an annual return of more than 40%. During the past two occurrences, in 2023 and 2019, the stock was coming off a bad year, with losses of more than 25%. This time around, however, the company is coming off its best year ever.
Will Meta have another strong year in 2024?
Meta’s stock is already up 30% this year, so even if its returns are flat from here on out, it would be another good year for the company. A lot is going to hinge on both the economy and Meta’s quarterly results, and whether it can keep growing at impressive rates.
If the economy slips into a recession and demand for ads declines, that could put a big dent in the company’s growth rate. For the last three months of 2023, Meta Platforms generated 25% revenue growth, with sales topping $40.1 billion. But it was only a year ago that a soft ad market resulted in its revenue falling by 4%. Any softness in the growth rate could give back some of the stock’s early gains this year.
The danger for investors is that the higher the stock’s valuation, the greater the expectations. And if Meta can’t live up to them, the stock could quickly come crashing down. While Meta has typically been a good buy since going public, all it takes is one bad year to wipe out a lot of those gains, such as in 2022, when the stock lost more than half of its value.
Should you invest in Meta Platforms stock?
It’s important for investors to remember that past performance doesn’t predict the future. While normally a strong January has resulted in bigger gains down the road, Meta’s stock has never had such a big year as it did in 2023, only to follow it up with another strong early start to the new year. Investors should also consider that the company is coming off a quarter that looked better than it otherwise would have been if not for a soft performance a year ago.
If you believe Meta can consistently grow at a rate of 20% or more, then it might be worth its high price tag today. I don’t fall into that crowd. I’m skeptical about whether it can continue generating such strong results, especially as it begins to lap stronger numbers from last year, which is why I think it may be due for a decline.
While Meta could still prove to be a good buy, a better option may be to invest in growth stocks that aren’t priced for perfection and that may possess more upside for investors.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
Meta’s Stock Jumped 10% in January, For the 6th Time Since 2013. Here’s How It’s Historically Done Afterward. was originally published by The Motley Fool