Meta Platforms’ stock (NASDAQ: META) has lost 47% YTD, while the S&P500 is down 12% over the same period. Further, the stock is currently trading around $178 per share, which is 29% below its fair value of $252 – Trefis’ estimate for Meta Platforms’ valuation.
The social media giant posted weak results in the second quarter of 2022, with earnings and revenues missing the street expectations. Its total revenues marginally decreased to $28.82 billion, mainly due to lower advertising revenues. The advertising revenues suffered due to the factors such as record-high inflation numbers, aggressive interest rate hikes by the Fed, the Russia-Ukraine crisis, and the normalization of e-commerce sales after the re-opening of offline stores. That said, META’s daily active users (DAUs) increased 3% y-o-y in the quarter. However, the average revenue per user (ARPU) decreased from $10.12 to $9.82. Overall, the net income decreased 36% y-o-y to $6.7 billion. The drop was primarily due to a 22% increase in the total cost & expenses.
The company’s revenues improved 37% y-o-y to $118 billion in 2021, with strong 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. That said, the revenue growth slowed down in the first six months of 2022. Notably, the top line improved just 3% y-o-y to $56.7 billion. Further, the total cost & expenses rose by 26% y-o-y over the same period, mainly due to higher research & development and general & administrative costs. This led to a 29% drop in the net income to $14.15 billion.
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The firm is expecting the advertising revenues to remain under pressure for some more time. It provided revenue guidance of $26-28.5 billion for Q3. Overall, Meta Platforms’ revenues are estimated to touch $122.8 billion in FY2022. Additionally, META’s adjusted net income is likely to remain around $34.5 billion in the year. This coupled with an annual EPS of $12.77 and a P/E multiple of just below 20x will lead to the valuation of $252.
|S&P 500 Return||2%||-12%||88%|
|Trefis Multi-Strategy Portfolio||5%||-9%||260%|
 Month-to-date and year-to-date as of 8/11/2022
 Cumulative total returns since the end of 2016