As shares of Meta Platforms (META) continue their meteoric ascent, investors are left wondering – is now the time to seize the gains and cash out? The stock has surged by a substantial 12.7% over the past month, culminating in a new 52-week high of $583.04, leaving many speculators in awe of its bullish trajectory. With a staggering 62.9% increase since the year’s commencement, META has significantly outpaced the Zacks Computer and Technology sector’s 23% rise and the 22.4% return of the Zacks Internet – Software industry.
Unpacking META’s Outstanding Performance
One cannot overlook the driving forces behind META’s remarkable outperformance. The company boasts a stellar track record of surpassing earnings expectations, having not once fallen short of the earnings consensus estimate over the last four consecutive quarters. In its most recent earnings report on July 31, 2024, Meta Platforms reported an impressive EPS of $5.16, exceeding the consensus estimate of $4.7 by a noteworthy margin.
Looking ahead, analysts anticipate META to post earnings of $21.36 per share on revenues of $161.62 billion for the current fiscal year, reflecting a substantial 43.64% uptick in EPS and a 19.8% surge in revenues. For the subsequent fiscal year, META is projected to achieve earnings of $24.10 per share on revenues amounting to $184.04 billion, translating to a year-over-year increase of 12.8% and 13.88%, respectively.
Evaluating Valuation Metrics
While META currently basks in the glory of hitting a 52-week high, questions loom regarding its future trajectory. A critical aspect in gauging this trajectory involves scrutinizing various valuation metrics to ascertain if the stock has outrun its potential. META’s Value Score stands at C, with Growth and Momentum Scores of B each, resulting in an overall VGM Score of B.
Assessing its value breakdown, META presently trades at 27X the current fiscal year’s EPS estimates, slightly below the peer industry average of 30.5X. In terms of trailing cash flow, the stock is priced at 29.2X compared to the peer group’s average of 24.4X, with a PEG ratio of 1.42. While these metrics paint a promising picture, they do not position the company as a top-tier value investment.
The Significance of Zacks Rank
Alas, one cannot overlook the implications of the stock’s Zacks Rank, which often supersedes style scores. Fortunately, Meta Platforms currently boasts a Zacks Rank of #2 (Buy) due to favorable earnings estimate revisions by analysts. Given the preference for stocks with Zacks Rank of 1 (Strong Buy) or 2 (Buy) alongside A or B Style Scores, META appears to align with this criterion, suggesting potential for further gains.
Comparing META with Industry Competitors
While META’s rally continues unabated, it’s worth considering how the company fares in comparison to industry peers. One standout competitor to note is Upland Software, Inc. (UPLD), which holds a Zacks Rank of #2 (Buy) coupled with an impressive Value Score of A, alongside Growth and Momentum Scores of F and A, respectively. UPLD’s last quarter earnings surpassed the consensus estimate by a notable 26.67%, with projections for the current fiscal year predicting earnings of $0.73 per share on $274.83 million in revenue.
Upland Software, Inc.’s shares have surged by 11.9% in the past month, trading at a forward P/E ratio of 3.22X and a P/CF ratio of 0.32X, painting a favorable picture for the company. With the Internet – Software industry ranking in the top 29% among all industries, both META and UPLD appear to benefit from favorable industry tailwinds in addition to their intrinsic strengths.
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