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Several analysts on Wall Street are already making bold projections for the stock market next year. They suggest that Meta Platforms and Circle Internet Group could be worthwhile investments.
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Meta is harnessing artificial intelligence to enhance its advertising efforts and could potentially transition into a consumer electronics leader if smart glasses take off.
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On the other hand, Circle is issuing USDC, the largest regulated stablecoin in the U.S. and Europe, and its market is anticipated to grow by 54% annually until 2030.
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The S&P 500 has risen 16% since the start of the year, and analysts are optimistic about its future trajectory. JP Morgan forecasts the index could hit 8,000 by 2026. Meanwhile, Evercore anticipates a more bullish scenario where it could reach 9,000. If achieved, that would represent an increase of 17% to 31% from its current level of about 6,849.
Among the roughly 70 stocks that I track, quite a few appear to be trading at lofty valuations. Take Palantir, for instance. Even with positive business momentum, its sales multiple markedly outpaces that of the nearest competitor in the S&P 500, which seems excessive.
Yet, I see a compelling buying opportunity in Meta Platforms and Circle Internet Group. A thoughtful investor might allocate $5,000 between these two, provided it doesn’t lead to a position that feels too large. It can be unsettling to have more than 5% of your portfolio in one stock, although comfort levels vary from person to person.
Here’s why I think Meta and Circle stand out as my top investment picks right now.
Meta recently posted solid third-quarter results, revealing a 26% revenue growth to $51 billion. Their net income, when excluding exceptional taxes, also climbed 20% to $7.25 per diluted share. Despite this, the stock took a hit following the announcement due to plans for heavier investments in artificial intelligence next year, leaving it trading 18% below its peak.
Looking ahead, Meta’s strength lies in its position as the second-largest player in ad tech. The value that platforms like Instagram and Facebook provide to advertisers cannot be understated. Meta also utilizes AI—from custom chips to proprietary language models—to enhance user engagement and ad performance across its services.
In the longer term, Meta has a considerable opportunity within the smart glasses market, where it enjoys a 73% share. The company aims to develop a superintelligence system designed for its newly launched augmented reality smart glasses. CEO Mark Zuckerberg believes these innovations could soon become the “primary computing devices” of the future.
Ultimately, it seems that Meta stock presents an appealing investment case, particularly as advancements in AI are expected to bolster advertising revenue in the short run, while smart glasses hold promise as a significant revenue stream in the future. Given its P/E ratio of 29x, it appears reasonably priced for a company expected to grow earnings by 16% annually over the next three years.
Circle, on the other hand, operates in the fintech space, focusing on stablecoins and offering software that enables developers to integrate digital asset storage and payments into their applications. Its flagship product is USDC, which stands as the largest stablecoin adhering to stringent regulatory standards in the U.S. and Europe.
Currently, Circle primarily generates revenue from interest, with USDC tokens backed dollar-for-dollar. They also invest reserves in cash or short-term Treasury bills to yield interest. Yet, the company is shifting towards processing payments through the Circle Payments Network (CPN), which promises a faster and cheaper transaction experience compared to traditional methods.
Circle has reported positive results for the third quarter, showing a 66% rise in revenues to $740 million, largely based on the doubling of USDC in circulation, despite slightly reduced interest rates. Additionally, adjusted EBITDA jumped 78% to $166 million.
Importantly, Circle shared that currently, there are 29 financial institutions part of the CPN, with another 500 potential customers in the pipeline. Moreover, they have begun testing the Arc blockchain, which has been designed specifically for stablecoin finance and resolves the issue of erratic gas prices common in other blockchains.
In conclusion, Circle stands out as a favored issuer of stablecoins among financial institutions, given its commitment to regulatory compliance. The projected growth rate of stablecoin revenues at 54% annually through 2030 positions Circle stock as a solid long-term investment. Moreover, it’s worth noting that Circle is trading at 7.5 times sales—arguably its lowest price point since going public earlier this year.
