Analyzing Meta Platforms’ Recent Stock Performance and Outlook

Meta Platforms (META) has become a focal point for investors and analysts alike. It’s important to examine several factors influencing the company’s near-term stock performance.

Over the past month, shares of this social media giant have seen a decline of -16.7%. In comparison, the Zacks S&P 500 composite recorded a loss of -7.3%. The Zacks Internet – Software industry, where Meta operates, fared slightly worse, with a decrease of -17.8%. This raises an essential question: What direction is Meta’s stock heading in the near future?

Changes in a company’s business outlook, whether through media releases or rumors, often result in a quick price shift for its stock. However, fundamental facts ultimately guide long-term investment decisions.

Evaluating Earnings Estimate Revisions

At Zacks, our primary focus is on changes in a company’s earnings projections. We assert that a company’s fair value is derived from the present value of its anticipated future earnings.

This analysis involves examining how sell-side analysts adjust their earnings estimates based on new business trends. An increase in earnings estimates typically correlates with a rise in the stock’s fair value. If the stock’s market price is lower than its fair value, investors tend to buy, pushing prices upward. Historical data shows a significant correlation between earnings estimate revisions and short-term stock price movements.

For the current quarter, Meta Platforms is projected to have earnings of $5.60 per share, reflecting a year-over-year increase of +18.9%. Notably, the Zacks Consensus Estimate has adjusted down slightly by -0.1% over the past month.

The consensus estimate for the current fiscal year stands at $26.70, indicating a year-over-year increase of +11.9%. This figure has slightly increased by +0.1% in the last 30 days.

Looking ahead to the next fiscal year, analysts expect Meta Platforms to report earnings of $30.21, which marks a +13.2% change compared to last year. This estimate has also seen a minor uptick of +0.1% recently.

Our proprietary tool, the Zacks Rank, provides a comprehensive view of a stock’s price direction in the near term by leveraging earnings estimate revisions. Taking into account recent changes in estimates and additional earnings-related factors, Meta Platforms holds a Zacks Rank of #3 (Hold).

The chart below illustrates the trajectory of the company’s forward 12-month consensus EPS estimate:

12-Month EPS and Projected Revenue Growth

While earnings growth is a crucial measure of a company’s financial viability, sustainable growth often depends on revenue expansion. A company typically cannot sustain earnings growth without corresponding revenue increases. Thus, understanding potential revenue growth is vital.

In Meta Platforms’ case, the consensus estimate for sales in the current quarter is $41.43 billion, indicating a +13.6% increase year-over-year. For the current and next fiscal years, estimates of $188.8 billion and $213.82 billion reflect anticipated changes of +14.8% and +13.3%, respectively.

Last Reported Results and Surprise History

In its most recent quarter, Meta Platforms reported revenues of $48.39 billion, a remarkable +20.6% increase from the previous year. The corresponding EPS of $8.02 has risen from $5.33 year-over-year.

When compared with the Zacks Consensus Estimate of $46.97 billion, the reported revenues result in a positive surprise of +3.02%. The EPS surprise stood at +20.06%.

The company has surpassed consensus EPS estimates for four consecutive quarters and has consistently exceeded consensus revenue forecasts during this timeframe.

Valuation Considerations

Any prudent investment evaluation should include an analysis of a stock’s valuation. Assessing whether a stock’s current price accurately reflects its intrinsic value and growth potential is essential for predicting future performance.

To determine if a stock is fairly valued, it’s beneficial to compare its current valuation multiples—like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF)—against its historical figures. Such comparisons also provide insights when measuring against peers.

The Zacks Value Style Score evaluates stocks based on a combination of traditional and unconventional valuation metrics. Stocks are graded from A to F, with higher ratings indicating better value ownership potential. Meta Platforms received a grade of C, suggesting it is trading in line with its peers. Click here to explore the specific valuation metrics influencing this score.

Conclusion

The analysis presented here and additional resources on Zacks.com can aid in assessing whether the current market discussions surrounding Meta Platforms merit attention. With a Zacks Rank of #3, it implies that the stock may perform similarly to broader market trends in the near term.

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This article originally published on Zacks Investment Research (zacks.com).

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.