A Closer Look at the Uncertain Future of Meta The Motley Fool

The success or the lack of it will be a catalyst for the performance of META stock in the next 5 years. It is not surprising to see why Meta’s most valuable companies growth rate is expected to improve in the coming years. Its monthly active user base stood at 2.9 billion at the end of last year.

CFRA analyst Angelo Zino upgraded his price target for Meta from $300 to $350 on Thursday thanks to the expectation the company “will find success penetrating” the text-based social media space. So, Meta Platforms can unlock an entirely new advertising opportunity with the metaverse, where marketers can spend money on ad space within the virtual world. According to Gartner, 25% of the people are expected to spend at least one hour within the metaverse by 2026 for work, shopping, entertainment, education, or social interactions. The company points out that “increased competition for people’s time and a shift of engagement within our apps” toward verticals with low monetization could weigh on its ad revenue growth. Additionally, tough year-over-year comparisons and the impact of inflation and supply chain challenges are likely to impact advertisers’ budgets negatively. Investors will need to decide whether they are willing to weather the volatility inherent in tech stocks or make a bet on the future of the metaverse before investing in Meta.

Profitability and Growth

But cash flow from Meta’s operations alone – mostly the business without spending on the metaverse – would represent a yield of 15%. That’s three times the free cash flow yield of consumer giant Procter & Gamble (PG.N), and more than oil major Exxon Mobil (XOM.N), which had a banner 2022. NEW YORK, Dec 21 (Reuters Breakingviews) – Meta Platforms (META.O) is the tale of two companies, tied together only by their potential to sell advertising and their owner Mark Zuckerberg. As big marketers tighten pocketbooks in 2023, the social media firm, which operates Facebook and Instagram, will become less of a cash machine. This will encourage its founder and chief to pluck his pet project, the metaverse, away from the rest of the business.

• Either way, it makes the $10 billion Reality Labs loss look like a drop in the ocean by comparison.
• Reels currently monetizes at a slower pace than older and more established products like the news feed and Stories.
• Meta also experienced its first-ever decline in daily active users on its Facebook platform.
• Our AI will rebalance your investments on a weekly basis to optimize performance.
• Businesses have slashed their advertising budgets due to soaring inflation, recessionary fears, and the Ukraine conflict.

The company wound up raising more than $16 billion making it the 3rd largest IPO in history at the time. “Our community continues to grow and I’m pleased with the strong engagement we’re seeing driven by progress on our discovery engine and products like Reels,” said Mark Zuckerberg, founder and CEO of Meta Platforms. Meta Platforms’ (META) stock performance has seen little respite in the bearish environment so far this year. After a mass sell-off in late October, stock sank 24% to the lowest price since 2016.

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With this, the company is now starting to “cash the check” by monetizing this feature. As I have noted previously, this comeback for shares in the Facebook and Instagram parent has been driven by success with cost-saving measures. These include the implementation of widescale layoffs, as well as the company’s scaling back of its metaverse plans. Investing in profitable companies carries less risk, particularly those demonstrating consistent profitability over the long term.

Meta also intends to release a web version of Horizon before the end of 2022, allowing people to interact with the metaverse without using a headset. This will be a significant step in allowing the company to identify a target consumer base that could be monetized in the future. Meta’s massive userbase and the unshakeable popularity of its platforms among users of different age groups make the company a favorite among advertisers.

Meta’s Stock Fell Close to 50% From Its Peak — Here’s Why

In the next 5 years, Meta is likely to remain the dominant social media company on a global scale, which would help the company bring in a steady stream of growing revenue and earnings. However, the bulk of these earnings might be reinvested in the business to achieve the metaverse goals. Meta Platforms is among the hardest hit stocks by the 2022 tech selloff, falling more than 60% year to date. Comparing a company’s return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets.

Meta Platforms finished 2021 with annual revenue of $118 billion, an increase of 37% over the prior year. The advertising business was the key driver of this impressive growth as it accounted for 97% of the company’s top line. The segment’s growth last year was driven by a 10% increase in ad impressions over 2020, as well as a 24% increase in the price per ad. Meta looks like a company in a transition period; its social media networks aren’t delivering the type of growth that investors might have come to expect. Still, Meta is about as close to being a social media monopoly as you can get, and the business is generating more free cash flow each quarter than most companies do as revenue in a year.

reasons Meta stock is exploding 20% after a whopper earnings miss

Revenue grew 20% year over year to $33.7 billion, but net income fell 8% to $10.3 billion. While the top line exceeded analyst expectations, its bottom line missed the target as cost came in higher than expected. While Meta’s profits got a jolt from cost-cutting, there could be another boost coming from a material raise to the company’s stock buyback. Stock buybacks tend to reduce shares outstanding, helping to boost earnings per share. Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day.

Meta is intentionally moving beyond being a social media company, so owning the stock means that you are buying into the company’s metaverse plans. The company generated $12.5 billion in free cash flow in Q4 2021, a 35% year-over-year increase, even with the additional spending. Meta is expected to experience a similar loss in its Reality Labs segment in 2022, so it’s clear that the company has a lot at stake in regards to its long-term vision of the metaverse.

Where will Meta Platforms stock be in five years?

First, Meta faces a tough comparison against its 48% growth in the first quarter of 2021. Second, it expects further headwinds on ad targeting in 2021 amid the privacy changes in Apple’s iOS 14, which allow users to opt-out of data-tracking, and the changes in the regulatory landscape. Last month, Meta reported its fourth-quarter result for the year ended Dec. 31, 2021.

Of 50 financial services companies rating the stock, 29 gave it a ‘buy’ rating, 18 ‘hold’ and three suggest a ‘sell’. The losses in its Virtual Reality (VR) division hit $2.8bn in the second quarter, even as its virtual reality hardware and software https://investmentsanalysis.info/ sales continue to grow. The stock’s losses have mirrored those of the tech-heavy Nasdaq 100 (US100) index, with confidence in tech markets having plummeted and Meta’s drastic pivot toward the metaverse having concerned shareholders.