Case Study: Meta (META) stock according to high performing analysts
Key Points
Performance
Meta Platform shares rose by 12.60% this week, pushing their year-to-date gains down to 92.66%. This compares favorably to both the S&P 500 and the Nasdaq Composite Index, which are up by 9.03% and 17.71%, respectively, on a year-to-date basis.
Event & Impact
Meta Platforms posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, META’s revenue totaled $28.65 billion, beating Wall Street’s consensus estimate by $990 million. Meta’s Q1 GAAP earnings-per-share came in at $2.20, which was $0.23/share above consensus estimates.
Noteworthy News:
Meta continued to show its ability to cut costs and focus on profits during Q1. The company’s global user base continues to grow. Looking forward, analysts are calling for ongoing cash flows/earnings-per-share growth throughout the remainder of 2023. Right now, the consensus analyst estimate for Meta’s full-year EPS growth rate sits at 39%.
Nobias Insights
58% of recent articles published by credible authors focused on META shares offer a “bullish” bias. 5 out of the 6 credible Wall Street analysts who cover META believe that shares are likely to rise in value. The average price target being applied to Meta by credible analysts is $241.67, which implies relatively flat upside potential relative to the stock’s current share price of $240.32.
Bullish Take Goldman Sachs analyst Eric Sheridan, a 4-star rated Nobias analyst, said, “Meta continued its momentum from last quarter in Q1 with management highlighting several key themes, including advertising revenue outperforming expectations and continued improvement in monetization efficiency, the analyst tells investors in a research note.”
Bearish Take Growth at a Good Price, a Nobias 4-star rated author, stated, “The real problem with Meta Platforms, Inc. is that the stock has gotten fairly pricey. At 26 times earnings, this is definitely not the deep value opportunity it once was.”
META Apr 2023
Meta Platforms (META) have been on an amazing run thus far throughout 2023, in large part, due to their management’s decision to make this a “year of efficiencies” and focus on cost cutting and profit generation instead of massive metaverse/virtual reality investments.
META shares are up by 92.66% on a year-to-date basis. After nearly doubling during 2023, META is now up by 16.8% during the trailing 12 month period. The Q1 earnings results reported this week served as the latest catalyst for META’s rally. META beat Wall Street’s expectations on both the top and bottom lines, causing shares to rally by another 12.6% this week alone.
Bearish Nobias Credible Analysts Opinions:
Shanthi Rexaline, a Nobias 4-star rated author, covered Meta’s earnings results in an article that she published at Business Insider this week. Rexaline wrote, “Meta Platforms, Inc. shares surged higher in premarket on Thursday after the social media giant wowed analysts and investors alike with its stellar quarterly results.”She continued, “The Mark Zuckerberg-led company reported first-quarter earnings per share of $2.20, beating the consensus estimate of $2.02. Revenue climbed 3% year-over-year to $28.65 billion compared to the Street estimate of $27.65 billion.” "Among the user metrics,” Rexaline added, “Meta's daily active users rose 4% to 2.04 billion.”
Growth at a Good Price, a Nobias 4-star rated author, also covered Meta’s Q1 results in an article this week which also highlighting their decision to sell their Meta shares. Looking at Meta’s bottom-line results, Growth at a Good Price said, “The company reported $6.9 billion in free cash flow ("FCF"), which shrinks to $3.9 billion if you subtract the $3 billion in stock-based compensation ("SBC") reported for the period.”
Looking at recent attempts to bolster profits, the author added, “CEO Mark Zuckerberg announced another round of cost cuts near the end of the first quarter; those cuts won’t make it into earnings until next quarter. So, there is some tentative cause to believe that margins could be better in Q2.” Then, they moved on to a growing concern: Meta’s investments into virtual reality and the metaverse.
Growth at a Good Price wrote, “Reality Labs’ revenue came in at a mere $339 million, which was down 51.2% from the same quarter a year before.” They continued, “Despite Meta’s initiatives to reduce costs, the company is still spending over $3 billion a quarter on it. It would be difficult for Mark Zuckerberg to just throw in the towel on the metaverse since he has invested so much in it and even re-named his company to reflect his ambitions in the space, but at this point, Meta’s VR segment is looking like a real money pit – one that’s not growing, at that.”
Moving onto META’s valuation metrics the author ey wrote, “At today’s price, Meta trades at:”
26 times earnings.
4.8 times sales.
4.3 times book value.
10.6 times operating cash flow.
36 times free cash flow
“Overall,” the author concluded, “Meta’s first quarter release was pretty good.” “The bottom line on Meta Platforms, Inc. is that it’s still a very profitable company with an admirable competitive position,” Growth at a Good Price said. “The real problem with Meta Platforms, Inc.,” the author continued, “is that the stock has gotten fairly pricey. At 26 times earnings, this is definitely not the deep value opportunity it once was.”
Therefore, they said, “I sold all my Meta shares earlier today. I think $250 is a reasonable valuation for META and the stock is already pretty close to that level. For this reason, I consider Meta Platforms, Inc. a hold at today’s prices.”
Bullish Nobias Credible Analysts Opinions:
Despite this author’s decision to sell, a slew of credible Wall Street analysts that Nobias tracks raised their price targets for META shares after digesting the company’s Q1 report. According to the Fly on the Wall: “DZ Bank analyst Ingo Wermann upgraded Meta Platforms to Buy from Hold with a price target of $270, up from $180.” Wermann is a Nobias 4-star rated analyst
“Bernstein analyst Mark Shmulik raised the firm's price target on Meta Platforms to $275 from $250 and keeps an Outperform rating on the shares following quarterly results. The company returned to growth, and guided for growth acceleration next quarter just as questions around a potential recession get louder, the firm notes.” Shmulik is a Nobias 5-star rated analyst.
“BofA analyst Justin Post raised the firm's price target on Meta Platforms to $300 from $250 and keeps a Buy rating on the shares following the company's Q1 beat. Above-Street Q2 revenue guidance suggests further acceleration and EPS upside, says the firm, which sees Meta as well positioned for ad revenue acceleration above the industry while cost efficiencies should provide additional EPS upside.” Post is a Nobias 5-star rated analyst.
“Guggenheim analyst Michael Morris raised the firm's price target on Meta Platforms to $320 from $240 and keeps a Buy rating on the shares. Though improved revenue trends "are the headline" from the company's Q1 report, accelerated DAU growth fueled by investment in AI recommendations should boost investor confidence that Meta can "effectively compete with TikTok and other platforms for consumer engagement," the analyst tells investors in a post-earnings note.” Morris is a Nobias 5-star rated analyst.
“Evercore ISI raised the firm's price target on Meta Platforms to $350 from $305 and keeps an Outperform rating on the shares. The company reported a "beat and raise" Q1, with the sales upside driven by an "impressive acceleration" in advertising revenue, the analyst tells investors in a research note. The firm says the stock's valuation is "still cheap" despite the almost 100% rally year-to-date. Meta remains Evercore's top internet long idea.” The Evercore analyst who covers META is Mark Mahaney and is a Nobias 4-star rated analyst.
And lastly, “Goldman Sachs analyst Eric Sheridan raised the firm's price target on Meta Platforms to $300 from $245 and keeps a Buy rating on the shares. Meta continued its momentum from last quarter in Q1 with management highlighting several key themes, including advertising revenue outperforming expectations and continued improvement in monetization efficiency, the analyst tells investors in a research note. The firm says Meta's revenue trajectory and cost efficiency narratives continue to gain momentum.” Sheridan is a Nobias 4-star rated analyst.
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.
According to the Fly on the Wall, “UBS raised the firm's price target on Amazon.com to $130 from $125 and keeps a Buy rating on the shares. The firm expects AWS to continue to decelerate into Q2 but start to recover in terms of sequential dollar growth in Q3, and UBS sees the retail margin story intact, though moving slightly slower than initially hoped”, the analyst tells investors in a research note.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 58% of recent articles published by credible authors on Meta Platforms expressed a “Bullish” bias. And the community of credible Wall Street analysts that Nobias tracks is even more bullish on META shares, with 83% of credible individuals calling for META’s share price to rise.
After its 12% rally this week, META trades for $240.32. Currently, the average price target being applied to META shares is $241.67. This implies a slight upside ahead; however, as you can see by the new price targets above, this figure is being held down by one relatively low outlier at the moment.
Disclosure: Nicholas Ward has no META position. 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.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
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.