Going into February 2022, shares of Meta Platforms (Nasdaq: META) had been practically reduce in half over the prior six months.
The steep drop in inventory value had my contrarian instincts tingling.
After I took a tough take a look at the corporate on February 17, 2022, I concluded that the inventory was a “full steal.”
Meta has been within the information once more over the previous week – and for historic causes. However earlier than we dig into its present valuation, let me end telling you the backstory…
Within the fourth quarter of 2021, the corporate had seen a mind-blowing 3.6 billion folks use at the very least one app in its “household” of apps, which incorporates Fb, Instagram, Messenger and WhatsApp.
Which means virtually half of all folks on the planet had used a Meta app!
On high of that, Meta’s inventory market valuation seemed extremely interesting.
Its price-to-earnings (P/E) ratio had dropped to only 17, a traditionally low cost quantity for this enterprise.
And if I didn’t embody the $10 billion loss that Meta had rung up investing within the metaverse, its P/E ratio dropped to 13!
To me, that was jaw-droppingly low cost for a enterprise that had generated $58 billion in money move from operations in 2021 and had a whopping $50 billion in money on its unimaginable steadiness sheet.
I additionally cherished the truth that analysts have been nonetheless anticipating Meta to develop income by $10 billion in 2022 and one other $17 billion in 2023.
My last conclusion on February 17, 2022, was this:
“The inventory may decline additional within the quick time period, however I believe within the medium to long run, proper now’s your probability to nab a fantastic entry valuation.”
Quick-forward to the current, and it’s clear that Meta’s inventory was in truth a fantastic alternative.
Meta shares have now greater than doubled since I concluded that they have been an entire steal.
Extremely, after I beneficial the inventory, it truly declined by one other 50% earlier than beginning its wonderful restoration.
This is a crucial reminder that nice investing requires numerous endurance.
Choosing the underside on a inventory is unimaginable. Discovering good worth isn’t.
How Does Meta’s Valuation Look Now?
Final Friday, Meta shares rocketed greater than 20% due to a fourth quarter 2023 earnings launch that the market clearly cherished.
In its launch, the corporate introduced a 25% enhance in revenues mixed with an 8% lower in prices.
It additionally delighted traders by revealing that it could start paying a dividend.
The 20% inventory transfer added an astonishing $196 billion to the corporate’s market capitalization.
This monumental enhance in Meta’s share value has additionally modified the inventory’s worth proposition.
As I stated above, after I first wrote about Meta, we may get shares for 17 occasions earnings, which was far beneath the place the corporate had ever traded earlier than.
When the inventory lastly bottomed late in 2022, Meta shares may very well be had for lower than 10 occasions earnings. That was a very epic shopping for alternative.
After final week’s leap, Meta is at the moment buying and selling at 31 occasions trailing earnings.
And primarily based on its common 2024 earnings per share estimate of $19.53 and its share value of $470, it’s buying and selling at 24 occasions ahead earnings.
To me, each of those numbers look about proper for the unimaginable money machine that Meta is.
In any case, a fantastic firm ought to garner a high valuation.
I hope you made some cash on this one! We had an opportunity to purchase this dominant firm at an absurdly low cost valuation.
That chance has handed, although, as a result of surge in Meta shares.
The Worth Meter now charges Meta Platforms as being “Appropriately Valued.”
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