Source: PaxForex Premium Analytics Portal, Fundamental Insight
In 2022, Meta Platforms faced a challenging market environment, compounded by investor skepticism surrounding CEO Mark Zuckerberg's metaverse endeavors. This led to a substantial 64% decline in share prices that year.
However, the trajectory of this leading social media stock has taken a remarkable turn since hitting the 2022 low. Bolstered by robust financial results and a bullish market, the stock has experienced an impressive surge, soaring by 321% since the close of 2022. Despite this substantial stock price appreciation, the shares continue to present an appealing investment opportunity.
Several factors contribute to the attractiveness of Meta Platforms' shares at present.
Undoubtedly, Meta stands out as one of the best-performing stocks since the commencement of 2023. Despite this remarkable surge, Meta's shares are currently trading at a forward price-to-earnings ratio of 25.6, representing a discount compared to the tech-heavy Nasdaq-100 index's average forward P/E of 30.4.
Wall Street analysts project significant growth for the company, anticipating compound annual rates of 14% for revenue and an impressive 21.3% for earnings per share over the next three years. While it's wise to approach forecasts cautiously, such optimistic projections make a compelling case for a bullish stance.
Meta's valuation becomes even more appealing when considering the unparalleled dominance of its business. Three of the company's social media platforms – Facebook, WhatsApp, and Instagram – claim the top four spots globally for overall users. The fourth platform, Messenger, holds the seventh position. Collectively, these four apps boast an astonishing 4 billion-plus monthly active users, with this figure witnessing a 6% year-over-year increase in Q4 of 2023.
Remarkably, nearly half of the global population engages with a Meta internet property at least once a month, showcasing an unparalleled reach that no other enterprise can match.
Meta enjoys formidable competitive advantages through powerful network effects stemming from its diverse array of social media apps, creating significant barriers for competing services to gain meaningful adoption. Despite efforts by ByteDance's TikTok, Meta maintains a strong foothold.
The attention and engagement garnered by Meta's apps contribute to a substantial data advantage, propelling the company into a leadership position in digital advertising. With $132 billion in revenue in 2023, accounting for 98% of the total revenue, Meta has become a preferred platform for advertisers seeking targeted advertising and value for their spending.
Meta's business model ensures high margins, especially when costs are well-managed. With a 2023 operating margin of 35%, Meta generated $43 billion in free cash flow. Such robust financials are consistent for the company, driving $122 billion in operating cash flow over the past two years. As of December 31, Meta boasted a net cash position of $47 billion, providing ample resources to aggressively invest in CEO Mark Zuckerberg's metaverse goals.
These strong finances have enabled Meta to return capital to shareholders through stock buybacks and dividends. In the last 12 months, the company spent $20 billion on reducing outstanding shares. In its latest financial report, Meta introduced a $0.50 per share quarterly dividend, appealing to income-seeking investors.
Considering its appealing valuation, unparalleled social media reach, and robust finances, Meta emerges as a compelling stock to consider for investors.
As long as the price is above 450.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 498.96
- Take Profit 1: 520.00
- Take Profit 2: 550.00
Alternative scenario:
If the level of 450.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 450.00
- Take Profit 1: 430.00
- Take Profit 2: 405.00
