Meta Platforms Stock Is Down 38% YTD, Is It Attractive?


Meta Platforms (Facebook)’s stock (NASDAQ: FB) has slipped 38% YTD, while the S&P500 is down 13% over the same period. The technology stocks, which enjoyed high growth after the March 2020 drop, are witnessing selling pressure in 2022. Notably, the benchmark NASDAQ 100 Technology Sector index is down 26% YTD.

FB stock is currently trading around $200 per share, which is 34% below its fair value of $303 – Trefis’ estimate for Meta Platforms’ valuationThe technology giant posted mixed results in the first quarter, with earnings beating expectations but revenues missing the mark. It reported total revenues of $27.9 billion – up 7% y-o-y. It was driven by a 6% rise in advertising revenues, followed by a 30% jump in the reality labs segment. Further, the firm outperformed the street expectations on two important metrics – daily active users (DAUs) and average revenue per user (ARPU). The DAUs were 1.96 billion on average for March 2022, an increase of 4% y-o-y. Similarly, ARPU improved from $9.27 to $9.54. Overall, the adjusted net income decreased 21% y-o-y to $7.5 billion, primarily due to higher research & development costs.

The company’s revenues increased 37% y-o-y to $118 billion in 2021. It was driven by a 37% rise in advertising revenues, followed by a 67% jump in the payment and other fees. Further, the DAUs improved 5% to 1.93 billion during December 2021 from 1.84 billion during December 2020. In addition, the annual worldwide ARPU (represents the sum of quarterly ARPU) in 2021 was $40.96 – up 28% y-o-y. All in all, the adjusted net income grew 35% y-o-y to $39.4 billion.

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Although FB has seen sluggish growth in DAUs over the recent quarters (on a sequential basis), we expect the metrics to post strong numbers in the subsequent months. This coupled with growth in ARPU is likely to drive FB revenues in the year. Overall, Meta Platforms’ revenues are expected to touch $130 billion in FY2022. Additionally, FB’s adjusted net income is likely to remain around $36.6 billion in the year. This coupled with an annual EPS of $13.12 and a P/E multiple of just above 23x will lead to the valuation of $303.

Here you’ll find our previous coverage of Meta Platforms stock, where you can track our view over time.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 FB Return 3% -38% 80%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio 0% -17% 226%

[1] Month-to-date and year-to-date as of 5/2/2022
[2] Cumulative total returns since the end of 2016

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