Case Study: What Credible analysts are saying on Meta (META) stock
Key Points
Performance
Meta Platforms (META) shares rose by 24.01% this week, pushing their year-to-date gains up to 49.54%. This compares favorably to the S&P 500 and the Nasdaq Composite index which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Meta Platforms announced their fourth quarter earnings this week, beating Wall Street’s consensus estimates on the top-line, but missing them on the bottom-line. During Q4, META’s revenue totaled $32.17 billion, beating Wall Street’s consensus estimate by $480 million, but representing -4.5% year-over-year growth. META’s Q4 GAAP earnings-per-share came in at $1.76, missing estimates by $0.48/share.
Noteworthy News:
It wasn’t META’s Q4 results that caused the stock to rally 24%, but rather management’s commitment to disciplined spending. Meta’s CEO, Mark Zuckerberg, called 2023 the “Year of Efficiency,” which caused the sentiment surrounding the stock to shift rapidly.
Nobias Insights
56% of recent articles published by credible authors focused on Meta shares offer a “bullish” bias. 7 out of the 8 credible Wall Street analysts who cover META believe shares are likely to rise in value. The average price target being applied to Meta by these credible analysts is $220.00, which implies upside potential of approximately 17.9% relative to the stock’s current share price of $186.53.
Bullish Take Shawn Johnson, a Nobias 5-star rated author, said, “Last year’s slump means the price-to-earnings ratio is only 17.17 (even with yesterday’s jump). For a tech giant, that’s pretty reasonable and gives me the confidence to buy. It also means that the share price can continue to rally without overvaluation.”
Bearish Take Cavenagh Research, a Nobias 5-star rated author, said, “For Q4 2022, the firm's operating income fell to $6.4 billion, which is about only half the level achieved in 2021 (operating income margin in Q4 2022 was 20%, as compared to 37% in Q4 2021).”
META Feb 2023
Meta Platforms (META) reported its fourth quarter earnings this week, causing the stock to rally 24.01% this week. This rally was a part of Meta’s broader 2023 rally; shares are now up by 49.54% on a year-to-date basis. This performance beats the S&P 500 and the Nasdaq Composite by a wide margin. Those two indices are up by 8.17% and 15.60%, respectively, during 2023 thus far.
Meta’s 49.5% year-to-date gains haven’t erased the stock’s 2022 sell-off, however. On a trailing twelve month basis, META shares are still down by 21.55%. But, even after this week’s 24% upward move, the majority of the credible authors and analysts that the Noblas algorithm follows continue to believe that shares have more room to run.
Bearish Nobias Credible Analysts Opinions:
Cavenagh Research, a Nobias 5-star rated author, published a bullish post-earnings article on Meta Platforms this week titled, “Meta: Buy 'The Year Of Efficiency'”. Cavenagh Research began their piece, stating, “With Meta dedicating 2023 to 'a year of efficiency', I argue the company has lots of room to shift market sentiment away from the negative narrative surrounding the firms' Reality Labs investments.” That quote comes from the top of Meta’s Q4 earnings report.
To begin its earnings report, the company quoted Mark Zuckerberg, Meta founder and CEO, who said, "Our community continues to grow and I'm pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives. The progress we're making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the 'Year of Efficiency' and we're focused on becoming a stronger and more nimble organization."
Cavenagh Research broke down the company’s top and bottom-line results during Q4, stating, “During the December quarter, Meta generated total group revenues of approximately $32.17 billion, which reflects a year over year contraction versus the same period in 2021 of close to 4%. Although the negative growth is certainly disappointing, the social media giant's topline beat analyst consensus estimates by about $475 million, according to data collected by Refinitiv.” They continued, “For the FY 2022, Meta recorded $116.61 billion of revenues, an increase of about 1% as compared to 2021.”
Moving onto the bottom-line, Cavenagh Research wrote, “For Q4 2022, the firm's operating income fell to $6.4 billion, which is about only half the level achieved in 2021 (operating income margin in Q4 2022 was 20%, as compared to 37% in Q4 2021).” They continued, “Adjusted EPS was recorded a $1.76, missing analyst estimates by 47 cents. However, it is worth pointing out that the net income in Q4 2022 includes $4.20 billion of restructuring charges. Excluding these costs, Meta's adjusted EPS would have been $1.24 higher.”
“In Q4 2022,” Cavenagh Research said, “daily active people (DAP) for the firms' Family of Apps reached 2.96 billion, an increase of 5% year over year.” During its Q4 report, Meta Platforms highlighted its daily active people and monthly active people growth across its various platforms, stating:
Family daily active people (DAP) – DAP was 2.96 billion on average for December 2022, an increase of 5% year-over-year.
Family monthly active people (MAP) – MAP was 3.74 billion as of December 31, 2022, an increase of 4% year-overyear.
Facebook daily active users (DAUs) – DAUs were 2.00 billion on average for December 2022, an increase of 4% year over-year.
Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of December 31, 2022, an increase of 2% year over-year.
Cavenagh Research also highlighted Meta’s shareholder returns during Q4 and 2022 on the whole, stating, “Investors will likely appreciate that Meta repurchased $6.91 billion and $27.93 billion worth of stock in Q4 2022 and FY 2022 respectively.”
Overall, this 5-star rated author concluded, “In my opinion, Meta is committed to prove to investors that the social media giant remains a highly innovative, highly profitable technology giant. Reiterate 'Buy' rating; and raise target price to $254.56/ share.”
Neutral Nobias Credible Analysts Opinions:
Bashar Issa, a Nobias 4-star rated author, presented a report with a more cautious tone this week after Meta’s 20%+ post-earnings rally. Issa highlighted Meta’s attractive valuation coming into the Q4 report, stating, “Meta Platforms, Inc. (NASDAQ: META) skeptics may be right about the company's struggles, but the sharp stock decline has been significantly out of proportion to the problems faced by the social media giant.” He touched upon the company’s high capital expenditures related to “moonshot” ideas related to the metaverse, noting their risk.
But, like Cavenagh Research, Isaa noted that Meta appears to be changing its tune with regard to massive speculative spending in 2023. Issa also put a spotlight on Meta’s shareholder returns, stating, “The primary concern over Meta Platforms, Inc. is investors' confidence in CEO Mark Zuckerberg's capital allocation decisions. The company spent more on share buybacks in 2021, when shares traded above $300, than it did when shares fell below $100. Nonetheless, management now seems more committed to returning capital to shareholders than before the pandemic. In Q4, META spent $6.9 billion on share repurchases, bringing the total to $28 billion. The Board has authorized $40 billion of share buybacks in 2023, $10 billion below what META spent on the program in 2021, but about $10 billion above that of 2022 levels.”
Issa is bullish on Meta’s more aggressive balance sheet management as well. He wrote, “What is interesting is the issuance of long-term interest-bearing debt for the first time since the retirement of the debt balance in 2013. For the first time, META is paying interest. Part of the debt issuance is to fund the share repurchases as equity capital becomes expensive relative to debt, despite rising interest rates. This is a welcome move by management, as it shows a commitment to return capital to shareholders.”
Yet, looking at the stock’s recent momentum, Issa stated, “I don't believe the 20% post-market rally is sustainable, given the uncertainties lingering over the CEO's Metaverse plans under the Reality Labs brand, which reported $4.7 billion of losses in Q4.” He continued, “Meta Platforms, Inc. shares are not as cheap as they were a few weeks ago, but I believe that there is a moderate capital appreciation opportunity as the company provides more clarity over its capital spending plans.”
Issa offered a neutral conclusion, stating, “At this point, I believe the downside risk to Meta Platforms, Inc. stock is relatively limited. However, given the recent share price momentum, I believe that the chance of above-average returns for META stock has also closed.”
Bullish Nobias Credible Analysts Opinions:
Shawn Johnson, a Nobias 5-star rated author, published a bullish article highlighting Meta’s Q4 results at Business News this week. Johnson said, “After closing at $153 on Wednesday, Meta share price ended Thursday at $188.77, a jump of over 23%. The positive results issued after market close were the main catalyst. Yet with the stock still down 20% over the past year, I think it has room to go even higher.”
Regarding the Q4 report, he stated, “It [Meta] showed that the number of daily active users on Facebook grew by 4% year-on-year, finally breaking the 2bn mark. That’s a staggering number of users on one platform and shows the dominance (and growth) of the site.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Another positive,” Johnson said, “was derived from cost reductions that are forecast going forward. Costs are expected to drop by $5 billion in 2023, partly due to 11,000 headcount cuts announced late last year.” “Furthermore,” the author stated, “last year’s slump means the price-to-earnings ratio is only 17.17 (even with yesterday’s jump). For a tech giant, that’s pretty reasonable and gives me the confidence to buy. It also means that the share price can continue to rally without overvaluation.” “On that basis I am seriously considering adding some meta shares to my portfolio,” Johnson concluded.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 56% of recent articles published by credible authors expressed a “bullish” bias. 7 out of the 8 credible Wall Street analysts that have offered an opinion on META shares believe that they’re likely to increase in value.
Currently, the average price target being attached to META shares by these credible analysts is $220.00. Even after Meta’s 24% rally this week, that implies upside potential of approximately 17.9% relative to META’s current share price of $186.53.
Disclosure: Nicholas Ward is long META. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.