Is Meta Platforms Stock Fairly Priced?

+50.44%
Upside
115
Market
174
Trefis
META: Meta Platforms logo
META
Meta Platforms

Meta Platforms’ stock (NASDAQ: META) has slipped 51% YTD, while the S&P500 is down 23% over the same period. The stock market experienced solid growth after the March 2020 drop, and high-growth technology stocks were a major beneficiary. However, broader markets, especially technology stocks, have faced selling pressure in 2022. It was because of record-high inflation figures, aggressive interest-rate hikes, and geopolitical tensions.

META stock is currently trading around $164 per share, which is 46% below its fair value of $303 – Trefis’ estimate for Meta Platforms’ valuationThe social media giant delivered mixed results in the first quarter of 2022, with earnings beating expectations but revenues missing the mark. It reported growth in both the advertising and the reality labs segment. Further, its two key metrics, daily active users (DAUs) and average revenue per user (ARPU), also registered growth in the quarter. That said, the investors are somewhat cautious about the stock, as the current macroeconomic environment can push the economy into a slowdown. It will likely hurt the advertising revenues of the company, which contribute more than 95% of the top line.

The company’s revenues improved 37% y-o-y to $118 billion in 2021 driven by growth in the DAUs and annual worldwide ARPU. Further, it translated into a 35% y-o-y rise in the adjusted net income to $39.4 billion. Moving forward, we expect the key metrics to see consistent growth, enabling the Meta Platforms’ revenues to touch $130 billion in FY2022. Additionally, META’s adjusted net income is expected to remain around $36.6 billion. 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.

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

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 Returns Jun 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 META Return -15% -51% 42%
 S&P 500 Return -10% -23% 84%
 Trefis Multi-Strategy Portfolio -10% -27% 190%

[1] Month-to-date and year-to-date as of 6/21/2022
[2] Cumulative total returns since the end of 2016

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