Yesterday saw a monster move in Meta Platforms (META).
META shares rose 11%, adding almost $200 billion in market cap.
So, what got Wall Street so excited?
It seems that the tech behemoth is jumping into the agentic AI space… and early indications are that Meta’s Muse agent is a hit.
In fact, it surged to the top spot in Apple’s App Store, and its adoption over its first 12 days is significantly higher than ChatGPT’s was when it was first released.
By now, it’s highly likely that you’ve used an AI chatbot.
They’re everywhere.
But for most users, ChatGPT, Claude and other bots are essentially souped-up web browsers.
They’re incredibly useful at finding and summarizing information. But you have to direct them in order to get the desired results.
Agentic AI represents the next step in this technology’s evolution.
This is where AI stops being a window on your laptop or phone and becomes a proper assistant working in the background.
For example, let’s say you need a plane ticket to Miami. You can instruct the agent to find you a ticket for next Tuesday, sometime after 11 a.m. and ideally under $300. The agent will dig around for the best deal and buy it for you.
Since it knows your preferences, it will be sure to book you an aisle seat and even preorder your in-flight gin and tonic!
This same functionality has existed with ChatGPT and Claude for a while. But Meta’s Muse has one advantage they don’t have.
It integrates with WhatsApp, Instagram and Meta’s other products. You can send it text messages through WhatsApp just as you would talk to a human assistant, and it parses through your social media history to learn your preferences.
So, what does this mean for Meta and the broader AI boom?
Let’s see what my system has to say about it.
My Green Zone Power Ratings don’t run on marketing hype. They look at the cold, hard data. So, let’s do a deep dive into the communications sector, which includes Meta and its fellow AI competitor Alphabet (GOOGL).
Regardless of whether Muse is the next major breakthrough in AI, communications as a whole remains something of a minefield. The sector rates poorly on my Green Zone Power Ratings system.
Of the 19 communications stocks, only four rate as “Bullish,” meaning a score of 60 or higher out of 100. (For those new to my system, “Bullish” rated stocks outperform the S&P 500 Index by double on average over the following year.)
Another five rate as “Neutral,” meaning my system would expect them to perform more or less in line with the broader market.
And 10 communications stocks – a full majority – rate as “Bearish,” meaning my system would expect them to significantly underperform the market.
Where Do Communications Pick Up Points?
The Green Zone Power Rating system is a composite score based on six primary factors: momentum, size, volatility, value, quality and growth, each of which comprises several sub-factors. (As we are looking at large-cap constituents of the S&P 500, I don’t consider size when doing the sector X-ray.)
So, where do communications stocks pick up the most points?
The sector rates well overall on its quality and growth factors.
Thirteen stocks rate as “Bullish” on quality, and another 12 rate as “Bullish” on growth. Value is well represented as well, with 10 – a majority – rating as “Bullish.”
After that, it really drops off.
Four rate as “Bullish” on their volatility factor, and just one rates as “Bullish” on momentum. For whatever potential agentic AI brings to the sector, it’s certainly not being reflected in stock price momentum.
So, how are we to interpret all of this?
Overall, the sector is growing, profitable and reasonably priced. These are “good companies” that are, for the most part, trading at good prices.
But in the current environment, they’re choppy and not trending higher relative to their peers in other sectors.
So, these “good companies” are not necessarily “good stocks” right now.
A Deeper Look at Communications
Let’s get into the nitty-gritty.
I ranked the 19 stocks in the communications sector by their Green Zone Power Ratings. Let’s take a look in particular at how our AI leaders fare.
The two top-rated communications stocks have virtually nothing to do with AI.
They’re traditional media companies, Fox Corp (FOXA) and News Corp (NWSA).
Some of these can probably be explained by the midterms. Elections tend to bring out the news junkies and boost the profits of TV and print media.
But Alphabet also rates as solidly “Bullish,” even if it’s a little on the expensive side. The stock rates a “Strong Bullish” 98 and 99 on its quality and growth factors, respectively, but “Bearish” on value.
Turning back to Meta, my system is telling us to steer clear for now. The company rates as “Bearish” on my Green Zone Power Ratings system. And as impressive as its recent price action has been, it wasn’t enough to materially raise its momentum score… which also remains “Bearish.”
My Green Zone Power Ratings are an objective, rules-based system. But they’re not a crystal ball.
If Muse really does turn out to be a game-changer, it might not fully reflect in the Green Zone ratings for weeks or months.
But based on the numbers we see today, my system is telling us that our money is better invested elsewhere.
To good profits,
Adam O’Dell
Editor, What My System Says Today
