Should you buy Meta stock?
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About 9 months ago I released a video on Meta criticizing the company’s brand and cost control and I gave the stock a neutral rating.
Turns out I couldn’t have been more wrong. Since that video, the stock has rallied over 100% and it's almost back to the level it was when the company changed its name from Facebook.
At the latest share price, the company has a valuation of 810 billion. It’s got 54 billion of cash and investments and 18.4 billion of long term debt so the enterprise value is 775 billion.
Taking into account the latest quarter, revenue over the last 12 months is 121 billion, Net income is 22.5 billion and free cash flow is 24.1 billion. That means the stock is now valued at 6.4 times revenue, 36 times earnings and 32 times free cash flow.
The turnaround in Meta’s valuation can be explained by Mark Zuckerberg getting real about the company’s position. Zuckerberg has got to work cutting costs and doubling down on the things that have previously made Meta such a success.
Headcount at Meta was cut by 14% and capital expenditure decreased by 18%. The company rolled out a new platform Threads, started monetising WhatsApp business users and its Advantage ads program is delivering significantly more value to advertisers. In addition, the company bought back 793 million dollars of stock.
As a result of all this, Meta’s numbers increased across the board. Revenue was up 11%, net income was up 16% and daily active users were up 7% to 3.07 billion.
#metastock #stockmarket #investing #stocks
Join 9000+ investors: https://www.overlookedalpha.com
About 9 months ago I released a video on Meta criticizing the company’s brand and cost control and I gave the stock a neutral rating.
Turns out I couldn’t have been more wrong. Since that video, the stock has rallied over 100% and it's almost back to the level it was when the company changed its name from Facebook.
At the latest share price, the company has a valuation of 810 billion. It’s got 54 billion of cash and investments and 18.4 billion of long term debt so the enterprise value is 775 billion.
Taking into account the latest quarter, revenue over the last 12 months is 121 billion, Net income is 22.5 billion and free cash flow is 24.1 billion. That means the stock is now valued at 6.4 times revenue, 36 times earnings and 32 times free cash flow.
The turnaround in Meta’s valuation can be explained by Mark Zuckerberg getting real about the company’s position. Zuckerberg has got to work cutting costs and doubling down on the things that have previously made Meta such a success.
Headcount at Meta was cut by 14% and capital expenditure decreased by 18%. The company rolled out a new platform Threads, started monetising WhatsApp business users and its Advantage ads program is delivering significantly more value to advertisers. In addition, the company bought back 793 million dollars of stock.
As a result of all this, Meta’s numbers increased across the board. Revenue was up 11%, net income was up 16% and daily active users were up 7% to 3.07 billion.
#metastock #stockmarket #investing #stocks
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NewsTranscript
00:00 About 9 months ago I released a video on Meta criticizing the company's brand and cost
00:04 control and I gave the stock a neutral rating. Turns out I couldn't have been more wrong,
00:09 since that video the stock has rallied over 100% and it's almost back to the level it was when the
00:15 company changed its name from Facebook. At the latest share price the company has a valuation
00:20 of $810 billion. It's got $54 billion of cash and investments and $18.4 billion of long term debt
00:27 so the enterprise value is $775 billion. Taking into account the latest quarter,
00:33 revenue over the last 12 months is $121 billion, net income is $22.5 billion and free cash flow
00:40 is $24.1 billion. That means the stock is now valued at 6.4 times revenue, 36 times earnings
00:46 and 32 times free cash flow. The turnaround in Meta's valuation can be explained by Mark Zuckerberg
00:52 getting real about the company's position. Zuckerberg has got to work cutting costs and
00:57 doubling down on the things that have previously made Meta such a success. Headcount at Meta has
01:03 been cut by 14% and CapEx decreased by 18%. The company rolled out a new platform for ads,
01:10 started monetizing WhatsApp business users and its Advantage Ads program is delivering significantly
01:16 more value to advertisers. In addition the company bought back $793 million of stock.
01:22 As a result of all this Meta's numbers increased across the board. Revenue was up 11%, net income
01:29 was up 16% and daily active users were up 7% to 3.07 billion. All that said there are some reasons
01:37 to be cautious. Net income was up 16% but it's still 30% below where it was in December 2020.
01:44 In addition the company is still planning to invest heavily in the Metaverse, data centers
01:49 and AI. CapEx will likely be in the $27-30 billion range this year. According to the Financial Times
01:56 Meta has blown over $40 billion on the Metaverse so far. Plus the rise in Meta's stock is not just
02:02 the company's doing. Improving inflation has sent the stock market back towards record highs
02:07 and that has given companies more confidence to run ads. If you assume Meta can grow revenues
02:12 10% a year for the next 10 years then operate with a 30% net income margin. Net income in 10
02:19 years time would be roughly $94 billion. Apply a 25 times multiple and the valuation comes to
02:25 roughly $2.4 trillion which works out to an investment return of 11.5% a year.
02:31 As I said in a previous video businesses don't really have too many options when it comes to
02:37 online advertising outside of Meta and Google. That continues to put Meta in a strong position
02:43 and there's probably more upside ahead. But these are my own personal opinions not financial advice
02:49 and I've got no position in Meta stock. For more detailed investing ideas make sure to visit
02:54 our website overlookedalpha.com