Social media innovator Meta Platforms, Inc. (META) has emerged as a prominent force in the digital realm, capturing attention with its dynamic family of apps and an ever-growing user base. Unyielding in its pursuit of progress, META stands at the forefront of innovation, utilizing artificial intelligence (AI) as a strategic asset to fortify its leadership in the industry.
In this article, we will take a closer look at META’s recent developments and financial performance and discuss why investing in this stock might be an ideal choice.
In the fiscal first quarter that ended March 2023, META’s family daily active people (DAP) reached a remarkable average of 3.02 billion, rising 5% year-over-year. Similarly, the family monthly active people (MAP) rose to an impressive 3.81 billion as of March 31, 2023, reflecting 5% year-over-year growth.
Expanding beyond user metrics, META’s first quarter of 2023 witnessed a notable leap in ad impressions delivered across the Family of Apps, boasting a remarkable 26% year-over-year growth.
In the quarterly report, Meta’s founder and CEO, Mark Zuckerberg, eloquently expressed, “Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.”
Furthermore, the stock has gained 119.8% over the past six months and 43.4% over the past three months, closing the last trading session at $246.74. The stock has gained 105% year-to-date.
These gains signify the company’s exceptional performance in the stock market and look poised to continue to deliver substantial growth and rewards to its investors. Wall Street analysts expect the stock to hit $281.05 in the near term, indicating a potential upside of 13.9%.
Here are the factors that could affect META’s performance in the near term:
Steady Financials
During the fiscal first quarter that ended March 31, 2022, META’s revenues rose 2.6% year-over-year to $28.65 billion. Its advertising revenue increased 4.1% year-over-year to $28.10 billion, and its family of apps revenue grew 4% year-over-year to $28.31 billion.
Also, its income from operations amounted to $7.23 billion. META’s net income and EPS came in at $5.71 billion and $2.20.
Consistent Growth
META’s revenue has grown at a CAGR of 17% over the past three years and 21.4% over the past five years. Its EBITDA has soared at CAGRs of 7.1% and 10.6% over the past three and five years, respectively.
Moreover, its EBIT and EPS have grown at CAGRs of 5.4% and 3.4% over the past three years and CAGRs of 8.4% and 5.9% over the past five years, respectively.
Favorable Analysts Estimates
Analysts expect META’s revenue for the fiscal second quarter ending June 2023 to be $30.96 billion, indicating a 7.4% year-over-year growth. The company’s EPS for the same quarter is expected to increase 16.4% from the prior-year quarter to $2.86.
Furthermore, META’s EPS and revenue are expected to rise 34% and 8.3% year-over-year to $11.51 and $126.31 billion in the fiscal year ending December 2023. Also, the company has surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Discounted Valuations
In terms of forward non-GAAP PEG, META is trading at 1.09x, which is 27.1% lower than its five-year average of 1.50x. The stock’s forward EV/Sales multiple of 4.97 is 22.9% lower than the five-year average of 6.44.
The stock’s forward EV/EBITDA of 10.01x is 18.8% lower than its five-year average of 112.33x.
Healthy Profitability
META’s trailing-12-month EBIT margin and EBITDA margins of 28.46% and 36.18% are 237.7% and 102.7% higher than their respective industry averages of 8.43% and 17.85%. Its trailing-12-month net income margin of 18.27% is 550.1% higher than the 2.81% industry average.
Its ROCE, ROTC, and ROTA of 17.29%, 14.35%, and 11.62% are 434.4%, 281.7%, and 741.2% higher than their respective industry averages of 3.24%, 3.76%, and 1.38%.
POWR Ratings Reflect Promising Prospects
META’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. META has a Quality grade of A in sync with its higher-than-industry profit margins. The stock also has an A grade for Sentiment, consistent with optimistic analyst expectations.
The stock is ranked #12 in the 57-stock Internet industry.
Click here to access META’s additional POWR Ratings (Growth, Value, Momentum, and Stability).
Bottom Line
META is currently trading above its 50-day and 200-day moving averages of $220.41 and $161.73, respectively, indicating an uptrend.
Moreover, the company’s first-quarter performance exemplifies its digital ecosystem’s enduring appeal and robust performance, underscoring its unwavering commitment to innovation and delivering value to its vast user base.
Considering the remarkable trajectory META is charting, it becomes increasingly apparent that this may be an opportune moment to consider investing in the stock. Hence, I think the stock might be a solid buy now.
How Does Meta Platforms, Inc. (META) Stack Up Against Its Peers?
While META has an overall POWR Rating of B, one could consider looking at its industry peers with A (Strong Buy) and B (Buy) ratings: trivago N.V. (TRVG), Travelzoo (TZOO), and Yelp Inc. (YELP).
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META shares were trading at $246.62 per share on Wednesday morning, down $0.12 (-0.05%). Year-to-date, META has gained 104.94%, versus a 7.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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