Meta Platforms Stock: Buy The Crash, Buy The Metaverse (NASDAQ:FB)

Meta Platforms, Inc./Facebook (NASDAQ:FB) Has declined since September last year, but essentially crashed after the company submitted a disappointing earnings report in early February. Meta’s share price peaked at around $ 380 and is currently below $ 190. In addition to the unprecedented 50%, the stock price of the tech giant has fallen. However, Meta remains the industry’s dominant and market-leading company, and must continue to be a leader in the social media space.

In addition, the company is currently very cheap and should continue to deliver solid revenue growth over the next few years. Meta is dealing with slowing growth and a temporary decline in EPS, but Facebook should return to profitable growth as the company progresses.

Meta’s earnings are imminent and its share price fell sharply at the event. Meta could exceed the reduced earnings estimate, and given the company’s huge earnings potential, Meta’s stock looks like a good buy so far.

FB 1 year

People love Facebook for $ 380 and many now hate Facebook for under $ 190. What happened to buying “buy cheap and sell high” when “blood is flowing in the street”? Initially, FB created a crater in response to the worse-than-expected fourth-quarter earnings announcement, and drastically lowered its stock price with a record drop in market capitalization. There was a gradual rebound in March, but it fell 25% from the recent highs in early April. Meta stocks are oversold again, but stocks are about to bottom out with significant $ 180-190 support. You can also see that perfect probability theory is on the rise. This indicates that the chart may change momentum. Facebook has basically returned all the profits of the last four years and is trading at about the same price as it was then.

At that time and now

In 2018, Facebook traded at a similar price, but since then the company has traded about $ 50 billion. revenueAnd this year’s estimate (consensus) is about $ 130 billion. Meta currently has a market capitalization of approximately $ 500 billion. This means that stocks traded at about 10 times the sales in 2018 and are now selling at about 3.8 times the sales.

• Gross profits for TTM over the last 12 months were about $ 35 billion at the time, but are now about $ 95 billion.
• TTM’s operating profit was $ 20 billion at the time, but is now $ 47 billion.
• TTM’s revenue was $ 16 billion at the time, but now it’s $ 39 billion.

FB’s revenue, profitability and revenue have grown significantly over the last few years, but inventories have basically returned to what they were four years ago. Most of Facebook’s profitability indicators have risen two to three times over this time frame, indicating that inventories are significantly cheaper than before. So why is Facebook so cheap, and is the stock worth buying?

Are you buying Meta?

You can see that Facebook missed an EPS quote last quarter. It wasn’t a big mistake, but the company missed EPS by about 15 cents. In addition, there will be a terrifying drop in EPS this year. Last year’s Facebook revenue was $ 13.80, this year’s consensus estimate is $ 12.16, and next year’s estimate is $ 14.39 (a consensus among 32 analysts).

Why did EPS decline in the first place?

We know that Facebook is making a big bet on the Metaverse. It’s not yet known if the bet will pay off, but the virtual Facebook world seems to appeal to many (potentially billions). Therefore, I do not scrutinize the company’s ambition to use banks in the next evolutionary step of the Internet. In my view, Meta’s investment in Metaverse will pay off, but it will take time and Metaverse will probably be a huge business in 5-10 years.

Early investors like Facebook will be the market leader in this profitable virtual internet market and the world. Many investors are angry that Facebook has spent more than analysts expected on the Metaverse project last quarter, and there is uncertainty about when the investment will pay off, so much. Investors are throwing away stocks. Is this a wise investment approach? Should Meta shareholders be more patient and give suspicious benefits to Mark Zuckerberg and the Facebook team? Whether you love him or hate him, Mark Zuckerberg has enriched many people very much. He has created a great business, made wise acquisitions, and probably knows more about the Metaverse than you or I.

Therefore, we believe that low profitability is a temporary phenomenon that most companies face in their business life cycle. Let’s take a look at these revenues again. Last year, the company earned $ 13.80 in EPS and TTM’s price-earnings ratio was only 13.5. Next year’s consensus estimate is $ 14.39, with a price-earnings ratio of only 13, making it a very cheap leader for Facebook’s dominant market.

In addition, revenue is growing significantly. Last year, the company reported revenue of $ 118 billion, but this year the consensus estimate is $ 131 billion, and next year analysts expect revenue of $ 153 billion. Therefore, YoY’s revenue growth is expected to accelerate from 11% this year to about 17% in 2023.

Revenue estimate

As the company grows, we expect a steady increase in sales of 15 to 20% year-on-year. In addition, the company needs to return to EPS growth over the next few years. Multiples of P / E should increase, as the company shows its ability to return to EPS growth. Stocks are currently trading around 13 forward P / E, but could trade around 18-22 times if there is more certainty about future earnings potential.

Here’s what Meta’s finances will look like in the future:

Source: Author

If the company returns to a stable EPS of about 15-20%, Meta’s EPS could exceed $ 25 in a few years. Also, as the company returns to growth and its earnings potential becomes more transparent, stocks should again demand higher P / E multiples. Meta is currently trading at a solid 13 forward P / E ratio, but this ultra-low multiple may not last. Instead, equities will probably see increased demand in the future, pushing their forward P / E multiples to the 18-22 range, and other tech-oriented growth companies are showing double-digit low earnings growth. I will do it. By adopting a slightly higher P / E multiple, we find that the company’s share price could rise to the $ 400 to $ 500 range within a few years. Therefore, I consider Facebook to be an attractive purchase here and may increase my position in the company within the next few days.

Metarisk

Of course, investing in meta comes with risks. Intensifying competition, government regulation, slowing the economy as a whole, and other variables are risks to Facebook. Advertising costs may slow down due to the softening of the economy, which may adversely affect the profitability of Meta. The company’s investment in Metaverse has failed and stock prices could fall further. The company’s social media platform can enter a duration of decline and have a significant negative impact on growth and profitability. Despite my bullish outlook, Facebook / Meta has a lot of risks and you need to carefully consider the risks before investing in a company’s stock.