Despite a turbulent moment, social media powerhouse Meta Stock Platforms (FB -3.68 percent), which owns the likes of Facebook, Instagram, and WhatsApp, is putting together a comeback.
Investors may be asking whether Meta stock has already reached the bottom after plunging to a 52-week low of $185.33 earlier this month. The stock has gained 18 percent in the previous 10 days, and investors may be questioning whether the company has already reached the bottom. As a result of disappointment with the company’s full-year results report and a larger sell-off in the technology sector, the stock has fallen by 51 percent since September 2021, according to the S&P 500.
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However, regardless of whether or not the company’s slump has ended, it is a fantastic asset to any stock portfolio in the long run. The reason behind this is as follows.
The Stock Is Incredibly Cheap
Meta stock Platforms is the undisputed leader in the social media field, with a significant market share. During the year 2021, the company’s social networks were utilized by more than 2.9 billion individuals each month, resulting in $117.9 billion in total revenue for the year. That is a significant increase over the $3.7 billion in sales that Meta generated a decade before, in 2011.
Aside from being continuously successful throughout that period, the firm has distinguished itself from many other technology companies in that regard. Meta stock Platforms made $0.46 in earnings per share in 2011, which increased to $13.77 in the following year — and this is one of the reasons why the stock is so inexpensive right now.
Based on that forecast for 2021, the company trades at a price-to-earnings multiple of only 15.5 — less than half the multiple of the Nasdaq 100 technology index, which trades at 32, which is the most expensive stock in the world. Meta stock has been severely battered, and its value would have to treble for it to trade in pace with the overall market.
It is debatable whether Meta Platforms, which has a ten-year track record of stable growth and profitability, deserves to be traded at a 50 percent discount to its counterparts in the technology industry. The answer will very certainly be no in the long run, especially given the exciting new development endeavor that is just around the corner.
The Metaverse Could Unlock Unprecedented Growth
When Meta stock Platforms presented its full-year financial report for the fiscal year 2021, the shares of the company plummeted for two main reasons. First and foremost, it notified the market that Apple’s modifications to its privacy policies will hurt Meta’s ability to target people with advertising across its social media platforms, resulting in a $10 billion revenue loss by 2022 as a result.
First and foremost, Meta’s Reality Labs sector, which is responsible for creating and maintaining the metaverse, suffered a massive $10 billion loss in 2021. In response, several people questioned how much money the corporation would have to invest in the new virtual environment before seeing a return on its investment. However, the corporation has changed its name from Facebook to Meta Stock Platforms to better represent its devotion to this endeavor, so large financial commitments shouldn’t come as a surprise.
The metaverse has the ability to alter our social interactions and even the way we go about our daily lives. A virtual avatar of oneself, surrounded by a self-sustaining digital economy that may include all of the well-known brands we are familiar with in the real world, is how Meta Platforms envisage users existing in the virtual world. Despite the fact that Meta intends to develop the ecosystem, the company understands that it will need a collaborative effort from other software businesses, as well as advanced hardware manufacturers such as semiconductor manufacturers, to fully bring the metaverse to life.
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The potential for profit might be immense. According to one projection, the metaverse will be valued $800 billion in 2024 and will expand at a rate of 13.1 percent per year thereafter, resulting in a $1.6 trillion annual value by 2030. In another estimate, the value of the company might reach up to $30 trillion over the following ten years. In any case, it makes the $10 billion loss suffered by Reality Labs appear like a drop in the bucket in contrast.
Why the Stock Is a Buy Now
Because of some of the problems outlined above, analysts anticipate that Meta Platforms’ profits will decline by 10% in 2022, to $12.49 per share. However, this is predicted to change fast, with a return to growth in 2023 that should allow the company to outperform its earnings in 2021.
On the revenue side, however, the corporation should continue to outperform expectations, with predicted 2022 sales of $132 billion reflecting a 12 percent increase over 2021.
Due to the market’s forward-looking nature, waiting until 2023 or even late 2022 to purchase the stock may result in paying a significantly higher price than you would have paid now. With Meta stock platform trading now trading at such a significant discount to the larger technology market, it’s difficult to imagine a situation in which it becomes any more affordable.
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