Today we are looking at Meta Platforms, Inc. (NASDAQ: META), to determine if the META stock is a good buy. We will look at META financial ratios, analyst ratings, and valuation to determine a META stock forecast and price.
What does META Do?
Meta Platforms, Inc. develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, wearables, and in-home devices worldwide. It operates in two segments, Family of Apps and Reality Labs. The Family of Apps segment's products include Facebook, which enables people to share, discover, and connect with interests; Instagram, a community for sharing photos, videos, and private messages, as well as feed, stories and more.
Background Information for a META Stock Forecast
Who are Meta Platforms, Inc.'s Competitors?
In order to undergo a comparable analysis (to determine META stocks value), we need to first outline who META's competitors are.
These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to META, and have a market cap similar to META (if possible).
By keeping this in mind, I found the following list of companies to be some of META stocks closest competitors:
SNAP, PINS, TWTR, and BMBL
META Stock News and Information
Has META Stock Been Mentioned in the News Recently?
Meta Platforms has officially changed its stock market ticker symbol to META from FB. The name change, first announced in October 2021, was finalized on June 10, 2022
Meta's efforts to distance themselves from their old name (Facebook) occurred after years of heavy criticism and scandals causing negative publicity around the Facebook name.
Meta CEO Mark Zuckerberg has also stated that the “metaverse” a core goal moving forward, and this name change symbolizes that.
If you would like to continue reading about this you can do so here
Meta Platforms, Inc.'s Recent Earnings have Deteriorated
META Earnings (Yearly):
- META Revenues: In FY 2021, META experienced a yearly increase in revenues of $31.96B (or 37.18%) resulting in a total revenue figure of $117.93B.
- META Cost of Revenues: In FY 2021, META experienced a yearly increase in their cost of revenues of $5.96B (35.69%), resulting in a total revenue figure of $22.65B. Since the increase (of 35.69%), in META's cost of revenue was lesser (by -1.49%) than the increase (of 37.18%) in META's revenues, we should expect that META experienced an increase in their FY gross profits.
- META Gross Profit: In FY 2021, META experienced a yearly increase in their gross profit of $26.01B (or 37.54%) resulting in a total gross profit of $95.28B. This increase is consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
- META EBITDA: In FY 2021, META experienced a yearly increase in their EBITDA of $15.21B (or 37.98%) resulting in a total EBITDA of $55.25B. This increase (of 37.98%) stems from the fact that META experienced a increase in their gross profits of 37.54% (as we saw in the previous bullet point).
- META Net Income: In FY 2021, META experienced a yearly increase in their net income of $10.22B (or 35.08%) resulting in a total net income of $39.37B.
- META EPS: As a result of META's increase in net income of $10.22B, META's EPS also increased (by $3.77) from $10.22 in FY 2020 to $13.99 in FY 2021
Overall, Meta had a great earnings perormance in 2021 as all of their important financial ratios (EBITDA, net income, and EPS) increaased by sizeable amounts. However, in order to get a better idea of Meta's overall earnings, it is important that we look at their recent quarterly performance.
META Earnings (Quarterly):
- META Revenues: In Q1 2022, META experienced a quarterly decrease in revenues of $-5.76B (or -17.12%) resulting in a total revenue figure of $27.91B.
- META Cost of Revenues: In Q1 2022, META experienced a quarterly decrease in their cost of revenues of $-343M (-5.4%), resulting in a total revenue figure of $6B. Since the decrease (of -5.4%), in META's cost of revenue was greater (by 11.71%) than the decrease (of -17.12%) in META's revenues, we should expect that META experienced an decrease in their Q1 gross profits.
- META Gross Profit: In Q1 2022, META experienced a quarterly decrease in their gross profit of $-5.42B (or -19.84%) resulting in a total gross profit of $21.9B. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4.
- META EBITDA: In Q1 2022, META experienced a quarterly decrease in their EBITDA of $-3.58B (or -24.31%) resulting in a total EBITDA of $11.14B. This decrease (of -24.31%) stems from the fact that META experienced a decrease in their gross profits of -19.84% (as we saw in the previous bullet point).
- META Net Income: In Q1 2022, META experienced a quarterly decrease in their net income of $-2.82B (or -27.42%) resulting in a total net income of $7.46B.
- META EPS: As a result of META's decrease in net income of $-2.82B, META's EPS also decreased (by $-0.98) from $3.72 in Q4 2021 to $2.74 in Q1 2022
Overall, it seems as though META had a poor financial performance as many of their financial metrics shrunk, most notably their EPS (by $-0.98), as well as their net income (by $-2.82B), and other metrics (as you can tell from the above bullet points).
However, despoite this poor performance META was able to beat their EPS estimate by $0.16 (or 6.25%), as they reported an EPS of $2.72 for the quarter (compared to their estimated EPS of $2.56).
Despite their poor performance on paper, it seems as though Meta's Q1 2022 financial performance was alright as they had some silver lining with their EPS beat.
Net Quarterly META Stock Buyback is Great News
As part of their Q1 2022 earnings release, META stated that they currently have 2.73B Shares Outstanding (weighted average), which is down -40M shares (from 2.77B shares outstanding in Q4 2021). This buyback represents 0.75% of the META Stock that was outstanding. This is good news for investors as they now own marginally more (% wise) of the META Stock and company.
Conversely, META stock has up to 34M of shares that they can issue (thereby diluting META's stock). This maximum dilution for the period would only have a dilutionary effect on META of 0.62%, which is not worrisome at all, espcially since they bought back 40M shares last quarter alone.
What are Analysts Rating META Stock as?
Here is the current spread of META stock ratings. In total there are 41 META stock ratings, which fall in the following categories.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if META stock is a buy or sell. Analysts are overwhelmingly in support of the META stock, as 40 of the 41 analysts with coverage on the META stock are either bullish or neutral.
META Stock Forecast 2022
Using a Comparable Analysis to Determine a META Stock Forecast
- Enterprise Value to Assets (EV/Assets): META's current EV/Assets ratio is 2.43, compared to the average EV/Assets ratio of META's peers being 2.1. This implies that META is overvalued and their share price should change by a factor of -13.6% to be at fair value (based on META's EV/Assets compared to the EV/Assets of their peers).
- Price to Sales (P/S): META stock P/S ratio is currently 3.7, compared to the average P/S ratio of META's peers being 4.71. This implies that META is undervalued and their share price should change by a factor of 27.3% to be at fair value (based on META's P/S compared to the P/S of their peers).
Overall, my META stock forecast for 2022 implies that the META stock is undervalued and needs to experience a change in stock price of (an average of) 6.9% to be considered “at fair value”.
Is META a good stock to buy right now?
Overall, due to the factthat my META stock forecast implies that META is undervalued and needs to experience a price change of 6.9% in order to be at their fair value, Meta's 2021 financials were great, a net quarterly share buycback, and analysts being in consensus that the META stock is either a "buy" or a "hold", I have conclded the following.
I think that the META stock is at a very attractive level (down 60% from 52-Week highs) and is fianlly starting to become a stock I would consider buying. I think that we can see a quick rebound in the META stock, and i would consider exiting at a 10%+ return.