Is the price of meta-platform shares reasonable?

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Shares of Meta Platforms (NASDAQ
NDAQ
:META) has slipped 51% since the start of the year, while the S&P500 is down 23% over the same period. The stock market has seen solid growth after the March 2020 plunge, and high-growth tech stocks have been the main beneficiaries. However, broader markets, particularly tech stocks, faced selling pressure in 2022. This was due to record inflation figures, aggressive interest rate hikes and geopolitical tensions.

META stock is currently trading around $164 per share, 46% below its fair value of $303 – Trefis’ estimate for Valuation of Meta Platforms. The social media giant delivered mixed results in the first quarter of 2022, with earnings above expectations but revenue missing. It has seen growth in both the advertising segment and the reality lab segment. Additionally, its two key metrics, daily active users (DAUs) and average revenue per user, also saw growth in the quarter. That said, investors are somewhat cautious of the stock as the current macro environment may lead to a slowing economy. This will likely hurt the company’s ad revenue, which contributes over 95% of revenue.

Company revenue grew 37% year-on-year to $118 billion in 2021, driven by growth in DAUs and annual global AR
AR
COULD. Additionally, this translated into a 35% year-over-year increase in adjusted net income to $39.4 billion. Going forward, we expect key metrics to grow steadily, enabling the Revenue from meta-platforms touch $130 billion in fiscal 2022. 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 just above 23x, will lead to a valuation of $303.

Here you will find our previous coverage of Meta Platforms stock, where you can follow our view over time.

Stock prices have fallen precipitously across all sectors over the past few months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a stock market crash. We capture key Dow Jones trends during and after major stock market crashes in our interactive dashboard analysis,’Comparison of stock market crashes.’

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