Meta Platforms Stock Topped The Consensus In Q2, What’s Next?

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META: Meta Platforms logo
META
Meta Platforms

Meta Platforms’ stock (NASDAQ: META) has rallied 159% YTD, while the S&P500 is up only 18% over the same period. The stock is currently trading around $312 per share, which is slightly below its fair value of $310 – Trefis’ estimate for Meta Platforms’ valuationThe company posted better-than-expected results in the second quarter of 2023, with revenues increasing 11% y-o-y to $32 billion. Further, daily active users (DAUs) grew 5% y-o-y to 2.06 billion for June 2023, followed by a 34% y-o-y improvement in the ad impressions across its Family of Apps. However, the average price-per-ad declined by 16% y-o-y in the quarter. On the cost front, the total expenses increased 10% y-o-y, primarily due to higher legal costs and restructuring charges. Overall, the net income was $7.8 billion – up 16% y-o-y.

The top line grew 7% y-o-y to $60.6 billion in the first half of FY2023. It benefited from higher DAUs and ad impressions, partially offset by lower revenue-per-ad. Notably, digital ad spending was down over the recent quarters due to tough macroeconomic conditions. Further, the costs and expenses witnessed an unfavorable increase over the first two quarters, resulting in a 5% drop in the net income to $13.5 billion.

Moving forward, we expect the revenue growth rate to improve over the subsequent quarters, driven by a recovery in advertising revenues. Notably, META expects the Q3 revenues to remain between $32-34.5 billion. Altogether, we estimate Meta Platforms’ revenues to touch $126.96 billion in FY2023. Additionally, the adjusted net income is likely to remain around $30.3 billion in the year. This coupled with an annual GAAP EPS of $11.56 and a P/E multiple of just below 27x will lead to a valuation of $310.

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What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 META Return 9% 159% 171%
 S&P 500 Return 2% 18% 103%
 Trefis Multi-Strategy Portfolio 6% 25% 303%

[1] Month-to-date and year-to-date as of 7/28/2023
[2] Cumulative total returns since the end of 2016

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