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Proprietary Data Insights Financial Pros’ Top Social Media Stock Searches in the Last Month
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Why Meta (META) Dominates Online Advertising |
Tech stocks took it on the chin last week, with many posting lackluster earnings… …except for Meta Platforms (META). Not only did the company beat on the top and bottom line, but issued a forecast that had investors giddy. As the stock sold off in the following days, financial pros began to look for ways to get involved, according to our TrackStar data. We’ve been big fans of Meta, a company with consistent growth and massive cash generation. But do we still feel the same way? Meta’s Business With over 3 billion daily users, Meta’s reach spans continents and generations. From Facebook’s ubiquitous blue thumbs-up to Instagram’s influencer-driven feeds, Meta’s apps dominate screen time worldwide. But the company’s ambitions stretch beyond smartphones, with Reality Labs pushing the boundaries of virtual and augmented reality. Meta segments its business into two key areas:
Meta’s latest quarter sizzled with a 22% revenue jump to $39.1 billion. At the same time, cost-cutting measures helped the company improve operating income from below 30% in 2022 to 38% in the latest quarter. Despite fears of market saturation, the average daily active people continues to climb every quarter. Meta is going all-in on AI, supercharging its infrastructure spending for 2025. The tech giant’s not just building smarter algorithms—it’s unleashing open-source powerhouses like Llama 3.1 to spark industry-wide innovation. AI is seeping into every corner of Meta’s empire, from sharper ad targeting to slicker content recommendations. Smarter ads mean happier advertisers willing to shell out more cash. And with AI-powered business messaging and virtual assistants on the horizon, Meta is eyeing new revenue streams. With billions of users as guinea pigs, these AI plays could turn Meta’s apps into money-printing machines—if Zuckerberg’s big bet pays off. Financials
Source: Stock Analysis 2022 was Meta’s worst year for revenue growth in a decade. Otherwise, it’s been relentless double-digit gains. Margins sit at some of their highest levels, including free cash flow. In the past year, Meta also announced its first dividend payout on top of its already generous share buybacks, which hit $41.5 billion, yielding 3.2%. The company’s balance sheet includes nearly $60 billion in cash with $38 billion in debt. Quite simply, Zuckerberg has plenty of money to spend even beyond the current $30 billion annual Capex. Valuation
Source: Seeking Alpha Despite the company’s ridiculous growth, Meta isn’t valued excessively. The stock trades at just 23.8x forward earnings and 16.1x cash, which is quite reasonable compared to Pinterest (PINS) or Google (GOOGL). And the price to earnings growth (PEG) of 0.2x suggests the stock is woefully undervalued. Growth
Source: Seeking Alpha Despite Meta’s cheap valuation, the company has delivered exceptional growth, sometimes well beyond its peers. For example, Meta’s EBITDA growth trounces the companies on this list. And its free-cash-flow growth is second only to Pinterest. Its average revenue growth over the past 3-5 years might not be as high as others, but remember, it’s being dragged down by one bad year. Profitability
Source: Seeking Alpha When it comes to profitability, none of Meta’s peers match its levels. Meta dominates on gross margin right down through net income. The only area it comes in just shy of its peers is free cash flow margin, where it’s a few points behind Baidu (BIDU) and Pinterest. Our Opinion 10/10 Meta’s stock has more than quintupled in the past few years. Yet, it’s still cheap relative to other tech stocks and its peers. We’re always amazed at how the company continues to drive revenue growth at its current size and saturation. While the stock may pull back with the broader market, we see it as a sign to scoop up shares rather than run for the hills. |
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