Meta Platforms: Is It Too Late to Buy the Stock After This Year’s 40% Rally?

Meta Platforms (NASDAQ:) stock soared by over nearly 40% since the beginning of the year, boosted by strong results in February, better-than-expected guidance for Q1/24, alongside the announcement of an additional $50 billion in share repurchases, and the introduction of its first-ever dividend.

The rally comes on top of last year’s 194% gain – mostly thanks to ongoing strength in AI-driven digital advertising and increased operational efficiency, which helped the giant consistently outperform EPS and revenue forecasts over the past four quarters.

Source: InvestingPro

Wall Street analysts raised their EPS estimates for the upcoming quarter from $2.46 to $4.30 per share over the past 12 months, representing a substantial increase of 74.9%.

Source: InvestingPro

A closer look at Meta’s fundamentals

A review of the fundamentals, however, suggests that investors may be overly optimistic.

Our ProTips highlight Meta’s areas of concern alongside its strengths, pointing out issues such as its high earnings multiple, elevated revenue valuation multiple, and high price-to-book ratio.

Source: InvestingPro

InvestingPro’s analysis on Fair Value anticipates a potential decline of 5.8% in Meta’s stock price. In contrast, Wall Street analysts are predicting a potential uptick of approximately 6.8%.

Source: InvestingPro

InvestingPro considers Meta’s financial health to be “Great”, which is determined by ranking the company on over 100 factors against companies in the Communication Services sector and operating in Developed economic markets.

Source: InvestingPro

Recent challenges

Recently, Meta faced challenges with Facebook’s Marketplace, as reported by The Wall Street Journal, highlighting user dissatisfaction due to counterfeit listings, fraud, and mismatches between product descriptions and received items.

Following the report, the company’s shares dropped more than 4% yesterday. Comments from former President Donald Trump, suggesting a TikTok ban would benefit Facebook, which he labeled an “enemy of the people,” have also negatively impacted the stock.

In summary, while Meta continues to benefit from advertising strength, concerns over valuation and recent developments suggest a cautious approach. Therefore, investors are advised to hold Meta shares until the upcoming earnings announcement on April 24 for further clarity.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.