![]() Furthermore, we shall analyze Meta's valuation to assess its long-term risk-reward. ![]() In today's note, we will look at analyst targets & estimates, technical charts, and quant factor grades to assess META's near-term risk-reward. Well, let's review near-term and long-term risk-reward for META to answer this question. Is Meta a "Sell" at current levels, or is it still a good long-term investment? And if you have been following my research work on SeekingAlpha, you know that I currently have a "Sell" rating on both Apple and Microsoft. Even on price-to-earnings, Meta's stock (trading at ~32x P/E) is looking just as expensive as big tech peers such as Apple ( AAPL) and Microsoft ( MSFT). Data by YChartsīased on its P/FCF multiple, Meta is more expensive than it was at the height of the liquidity bubble of 2020-21. Yes, Meta is still some way off of its all-time highs of ~$1T however, its trading multiples have ballooned from ~10-12x P/FCF to ~40-42x P/FCF (levels last seen in late-2020). ![]() While the reversal in Meta's quarterly free cash flow generation trends has been impressive, its stock has rebounded even more spectacularly - climbing from a market cap of ~$250B to ~$700B. More importantly, Meta's aggressive cost-cutting measures have yielded incredible results in a short space of time, with quarterly free cash flows rebounding sharply in the last couple of quarters. ![]() Through Q1 2023, Meta's user growth and engagement metrics have held up strong, with Meta's AI investments starting to pay off. Meta Platforms Stock: 4 Reasons To Buy.Meta Stock: 5 Things Smart Investors Should Know.And as you may know, I have provided a couple more (less aggressive) positive endorsements for Meta since then. As of writing, META stock is up ~200% since I issued that "Strong Buy" call in late October. Source: Meta Q3 Review: Firmly In The Penalty Boxįortunately, Meta's management found cost religion soon after, and the rest is history. Key Takeaway: I rate Meta a "Strong Buy" in the $90s Yes, cheap could get cheaper, as we have seen over the last few quarters however, the risk/reward situation is still heavily tilted in favor of bulls and too compelling to ignore for long-term-oriented investors. At ~$250-260B in market cap, Meta is ridiculously cheap. The latest downdraft in Meta's stock looks like a capitulatory move. Meta's products and services are used by 3B+ people on a daily basis, and none of Facebook, WhatsApp, Messenger, or Instagram are going anywhere. After internalizing Meta's Q3 report, I continue to like their social media assets, and I think we are getting a great deal at these prices. Due to heightened business uncertainty, Meta could remain in the penalty box until it shows significant improvement in business fundamentals. Hence, we may well get a re-acceleration in revenues by the second half of next year or early 2024. With that said, some of Meta's investments targeted at Reels, WhatsApp, and Messenger monetization should start yielding results in the next 12-18 months. Amid a challenging macroeconomic environment, Meta's aggressive spending plan for next year is scary poppins, and we could even see negative earnings in 2023 if the macro worsens from here. The biggest issue with Meta right now is its management's lack of willingness to moderate expenses quickly to protect or boost near-term profitability. In my view, Meta's Q3 report was slightly better-than-expected, and Q4 guidance was not apocalyptic. presented an aggressive spending plan for 2023 at the time of releasing Meta's Q3 2022 earnings report. After recording a series of poor quarterly reports, Zuckerberg & Co. Market sold META stock into the abyss, and at one point, META traded at just ~10-12x P/FCF. However, as a consequence of Meta's free-spending ways, Mr. While Meta's stock experienced insane volatility amid a vicious revenue and earnings contraction in 2022, Meta's key business fundamentals (i.e., user growth and engagement) remained resilient throughout these market gyrations. ( NASDAQ: META) stock has shot up higher in a straight line (~3x'ing in 8 months or so), with the social media giant's "Year of Efficiency" and the early promise of generative AI luring investors and speculators back into META. Since hitting a capitulatory bottom in October 2022, Meta Platforms, Inc.
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