Should you buy Meta Stock? (July 2023)
- 8 months ago
Meta stock analysis.
Discover under-the-radar stock ideas: https://www.overlookedalpha.com
Two weeks ago, Meta unveiled a new social media platform called Threads. The platform hit 100 million users in less than 5 days surpassing ChatGPT as the fastest growing product of all time. The question is, will it have a material impact on Meta stock?
At the latest share price, Meta has a valuation of 800 billion dollars. It’s got 11.6 billion of cash on the balance sheet and 10 billion of long term debt so the enterprise value is 797 billion.
Revenue based on the last 12 months is 117 billion, with net income of 21.4 billion and free cash flow of 17.6 billion. That means Meta stock is valued at 6.8 times revenue, 37 times earnings and 45 times free cash flow.
That’s an expensive price to pay. But it’s easy to see why Meta is valued at a premium.
It’s family of apps are used by more than 3 billion people around the world, it has excellent gross margins of 80% and a good chunk of revenue flows straight to the bottom line. In other words, Meta is an extremely profitable business.
However, after a 160% rally year to date, some caution may be needed. Trailing twelve month revenue is flat and net income is still down 45% from its peak after the company started to invest heavily in the metaverse and AI.
As for threads, the reason it’s grown so quickly is because users have simply been ported over from Instagram. In other words, it’s not organic growth. And CNBC reported yesterday that, after some initial excitement, time spent on the app is already down 50%.
#metastock #stocks #investing #stockstowatch
Discover under-the-radar stock ideas: https://www.overlookedalpha.com
Two weeks ago, Meta unveiled a new social media platform called Threads. The platform hit 100 million users in less than 5 days surpassing ChatGPT as the fastest growing product of all time. The question is, will it have a material impact on Meta stock?
At the latest share price, Meta has a valuation of 800 billion dollars. It’s got 11.6 billion of cash on the balance sheet and 10 billion of long term debt so the enterprise value is 797 billion.
Revenue based on the last 12 months is 117 billion, with net income of 21.4 billion and free cash flow of 17.6 billion. That means Meta stock is valued at 6.8 times revenue, 37 times earnings and 45 times free cash flow.
That’s an expensive price to pay. But it’s easy to see why Meta is valued at a premium.
It’s family of apps are used by more than 3 billion people around the world, it has excellent gross margins of 80% and a good chunk of revenue flows straight to the bottom line. In other words, Meta is an extremely profitable business.
However, after a 160% rally year to date, some caution may be needed. Trailing twelve month revenue is flat and net income is still down 45% from its peak after the company started to invest heavily in the metaverse and AI.
As for threads, the reason it’s grown so quickly is because users have simply been ported over from Instagram. In other words, it’s not organic growth. And CNBC reported yesterday that, after some initial excitement, time spent on the app is already down 50%.
#metastock #stocks #investing #stockstowatch