Evaluating Meta Platforms – Look Beyond Technicals, Assess Fundamentals!

Now trading at a price of $318.18, Meta Platforms has moved 0.8% so far today.

Meta Platforms returned gains of 230.0% last year, with its stock price reaching a high of $330.54 and a low of $94.79. Over the same period, the stock outperformed the S&P 500 index by 215.0%. More recently, the company's 50-day average price was $305.88. Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. Based in Menlo Park, CA, the large-cap Technology company has 66,185 full time employees. Meta Platforms has not offered a dividend during the last year.

EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:

2018 2019 2020 2021 2022 2023
Revenue (MM) $55,838 $70,697 $85,965 $117,929 $116,609 $120,523
Gross Margins 45% 34% 38% 40% 25% 24%
Operating Margins 45.0% 35.0% 39.0% 40.0% 25.0% 24.0%
Net Margins 40.0% 26.0% 34.0% 33.0% 20.0% 19.0%
Net Income (MM) $22,112 $18,485 $29,146 $39,370 $23,200 $22,545
Net Interest Expense (MM) $448 $826 $672 $531 $276 $276
Depreciation & Amort. (MM) $4,315 $5,741 $6,862 $7,967 $8,686 $9,698
Earnings Per Share $7.57 $6.43 $10.09 $13.77 $8.59 $8.59
Diluted Shares (MM) 2,921 2,876 2,888 2,859 2,702 2,455
Free Cash Flow (MM) $15,359 $21,212 $23,584 $38,993 $19,044 $24,034
Capital Expenditures (MM) $13,915 $15,102 $15,163 $18,690 $31,431 $31,476
Net Current Assets (MM) $37,273 $33,903 $44,644 $25,558 -$465 -$3,095
Long Term Debt (MM) $0 $7,137 $0 $870 $9,923 $18,382
Net Debt / EBITDA -0.34 -0.39 -0.44 -0.28 -0.12 -0.27

Meta Platforms has growing revenues and increasing reinvestment in the business, low leverage, and decent operating margins with a negative growth trend. However, the firm suffers from slimmer gross margins than its peers and EPS growth achieved by reducing the number of outstanding shares. Finally, we note that Meta Platforms has irregular cash flows.

Meta Platforms's Valuation Is in Line With Its Sector Averages:

Meta Platforms has a trailing twelve month P/E ratio of 27.0, compared to an average of 27.16 for the Technology sector. Based on its EPS guidance of $15.72, the company has a forward P/E ratio of 19.5. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 2.1%. On this basis, the company's PEG ratio is 12.67, which suggests that it is overpriced. In contrast, the market is likely undervaluing Meta Platforms in terms of its equity because its P/B ratio is 5.73 while the sector average is 6.23. The company's shares are currently trading 208.5% above their Graham number.

Meta Platforms Has an Analyst Consensus of Some Upside Potential:

The 49 analysts following Meta Platforms have set target prices ranging from $94.31 to $410.25 per share, for an average of $341.68 with a buy rating. As of April 2023, the company is trading -10.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Meta Platforms has a very low short interest because 1.5% of the company's shares are sold short. Institutions own 76.3% of the company's shares, and the insider ownership rate stands at 0.23%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 8% stake in the company is worth $57,752,965,183.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.