Is Meta Platforms Stock Fairly Priced?

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Meta Platforms’ stock (NASDAQ NDAQ : META) has slipped 51% YTD, while the S&P500 is down 23% over the same period. The stock market experienced solid growth after the March 2020 drop, and high-growth technology stocks were a major beneficiary. However, broader markets, especially technology stocks, have faced selling pressure in 2022. It was because of record-high inflation figures, aggressive interest-rate hikes, and geopolitical tensions.

META stock is currently trading around $164 per share, which is 46% below its fair value of $303 – Trefis’ estimate for Meta Platforms’ valuation. The social media giant delivered mixed results in the first quarter of 2022, with earnings beating expectations but revenues missing the mark. It reported growth in both the advertising and the reality labs segment. Further, its two key metrics, daily active users (DAUs) and average revenue per user, also registered growth in the quarter. That said, the investors are somewhat cautious about the stock, as the current macroeconomic environment can push the economy into a slowdown. It will likely hurt the advertising revenues of the company, which contribute more than 95% of the top line.

The company’s revenues improved 37% y-o-y to $118 billion in 2021 driven by growth in the DAUs and annual worldwide AR AR PU. Further, it translated into a 35% y-o-y rise in the adjusted net income to $39.4 billion. Moving forward, we expect the key metrics to see consistent growth, enabling the Meta Platforms’ revenues to touch $130 billion in FY2022. Additionally, META’s adjusted net income is expected to remain around $36.6 billion. This coupled with an annual EPS of $13.12 and a P/E multiple of just above 23x will lead to the valuation of $303.

Here you’ll find our previous coverage of Meta Platforms stock, where you can track our view over time.

Stock prices have fallen precipitously across sectors over recent months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a market crash. We capture key trends in the Dow during and after major market crashes in our interactive dashboard analysis, ‘Market Crashes Compared.’

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