Meta Stock: An Attractive Valuation

PUBLISHED Aug 29, 2022, 10:39:23 AM        SHARE

imgMuhammad Shoaib


Meta Platforms, Inc. is one of the most valuable companies in the world. It is known as Meta. It was formerly named Facebook, Inc. Facebook, Inc., is an American multinational technology conglomerate headquartered in Menlo Park, California. It owns Facebook, Instagram, and WhatsApp with other many products and services. It is a well-known company in America and is considered one of the Big Ten American information technology companies, including Google, Amazon, Apple, Microsoft, etc. Meta sells a lot of products and services like Facebook, Messenger, Facebook Watch, Meta Portal, etc. Meta has also adopted Oculus, Giphy, Mapillary, Customer, and Precise. It has invested 10.23% shares in Jio Platforms. In 2021, it generated 96.9% of its revenue from the sale of advertising.

In October 2021, the company changed its name from Facebook, Inc., to Meta Platforms, Inc., to show its focus on the metaverse. And as per Meta, the "metaverse" is an integrated environment that links all of the company's products and services. According to the long-term forecasts, the worth of Meta's stock will be $272 at the end of 2022 and $360 in 2023. It is also forecasted that the stock price of Meta will be $470 in 2025, $580 in 2027, and $765 in 2030. However, according to some other renowned analysts, the stock price will rise in the following ways, by the end of 2022 the stock price will hit $200 then $250 by the middle of 2023, $300 within the year 2024, $400 in 2026, $500 in 2028, $600 in 2030 and $700 in 2033. You can aslo read read Tesal stock analysis.

Is Meta a good buy?

Meta stock provides a well good return as well as a high margin of safety. However, after its transformation into the metaverse, analysts predicted that it will be going to be a highly profitable and cash-generating business in the social media industry.

Meta Stock Analysis

Meta previously called Facebook NASDAQ: META, its shares price is moving down because of decreasing demand for advertisement and foreign currency exchange rate. As a result, the net income of the meta declined by 29% in the first sixth month of its financial year. Since the stock is trading at low the long-term investors get an opportunity to buy the stock at an attractive valuation. The company faces many challenges however they never affected the growth and it continues to rise its engagement across its family of apps. Buy Rating: It has been calculated that the five-year target price of meta stock will be per share $451. According to the analysis I have done, I can say that the company will continue to grow at a 20% growth rate in the long run. The prediction may be assumed as a conservative estimate as the growth rate of the last five years was 33%. Due to high inflation in the market because of the Russia-Ukraine war and post-COVID-19, the growth of many companies slows down. As the company can monetize its user engagement into revenue, I do believe that the net margins will be between 20% to 30%. I will use a 28% net margin moving forward for this analysis. Meta stock will trade on par value with the overall market, as per my estimation which currently stands at 17. When the global market recovers, we expect that the price-to-earnings ratio (P/E) of meta's stocks expand as well. Moreover, the company has an additional $24 billion for repurchasing its shares. Meta's outstanding share will decline by 136 million at the current price. Investors' returns will boot up to 10% because of this. Look for Amazon stock as well.

Following is the table of the current year and five-year estimate of given heads.

Meta Company Current Year 11 August, 2022 5-year forecast
Revenue in millions of dollars $117,930 $244,538
Net margin in percentage 33.4% 28.2%
Net income in millions of dollars 39,370 68,862
Shares outstanding 2,859,000,000 2,592,000,000
Per share net income $13.77 $26.57
P/E ratio 13 17
Stock price $177.5 $451

How to Read the Table

The above table shows how we forecast the future five-year stock analysis of meta. Since the current revenue of meta stock is $117,930 million. As earlier we mentioned that the growth will 20% for next five year. If we multiply the current year's revenue with the growth rate, we will get $244,538 million. Now when we multiply the five-year revenue by a net margin of 28.2%, we will get a net income of $68,862 million. To calculate the net income per share, divide the net income by the total number of outstanding shares (2,592,000,000) we get $26.57 net income per share. To predict the share price in five years, we will multiply the P/E ratio in five years by net income per share. By doing this calculation we get the result of $451 per share. Since we can claim that Meta stock's average annual return will be 30.8% or for the five-year potential return of 154%. Author's Note Being a long-term investor, I usually forecast the five-year target price of a stock. For a buy rating, I look for a stock that can double its price during this 5-year duration. As we know that 8.91% is the annual average return of long-term markets. However, this will produce much higher than the market which is close to 20% annual return.


  • Although Meta stock is earning 13 times in the financial year 2021, it is sold at discount to its long-term growth prospects.
  • Authorized stock buybacks should boost returns by 10%.
  • Our target share price is $451.

More analysis of stocks are available here:

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