Should You Think About Buying Meta Platforms, Inc. (NASDAQ:META) Now?


Today we’re going to take a look at the well-established Meta Platforms, Inc. (NASDAQ:META). The company’s stock saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Meta Platforms’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Meta Platforms

Is Meta Platforms Still Cheap?

According to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Meta Platforms’s ratio of 33.83x is above its peer average of 15.4x, which suggests the stock is trading at a higher price compared to the Interactive Media and Services industry. But, is there another opportunity to buy low in the future? Given that Meta Platforms’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Meta Platforms generate?

earnings-and-revenue-growth

earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Meta Platforms. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? META’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe META should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on META for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for META, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. Case in point: We’ve spotted 2 warning signs for Meta Platforms you should be aware of.

If you are no longer interested in Meta Platforms, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.



Read More: Should You Think About Buying Meta Platforms, Inc. (NASDAQ:META) Now?

2023-09-02 14:00:26

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