Going into February 2022, shares of Meta Platforms (Nasdaq: META) had been practically lower in half over the prior six months.
The steep drop in inventory value had my contrarian instincts tingling.
Once I took a hard look on the firm on February 17, 2022, I concluded that the inventory was a “full steal.”
Meta has been within the information once more over the previous week – and for historic causes. However earlier than we dig into its present valuation, let me end telling you the backstory…
Within the fourth quarter of 2021, the corporate had seen a mind-blowing 3.6 billion individuals use at the very least one app in its “household” of apps, which incorporates Fb, Instagram, Messenger and WhatsApp.
Meaning nearly half of all individuals on the planet had used a Meta app!
On high of that, Meta’s inventory market valuation seemed extremely interesting.
Its price-to-earnings (P/E) ratio had dropped to simply 17, a traditionally low-cost quantity for this enterprise.
And if I didn’t embody the $10 billion loss that Meta had rung up investing within the metaverse, its P/E ratio dropped to 13!
To me, that was jaw-droppingly low-cost for a enterprise that had generated $58 billion in money circulate from operations in 2021 and had a whopping $50 billion in money on its unimaginable stability sheet.
I additionally beloved the truth that analysts had been nonetheless anticipating Meta to develop income by $10 billion in 2022 and one other $17 billion in 2023.
My ultimate conclusion on February 17, 2022, was this:
“The inventory may decline additional within the quick time period, however I believe within the medium to long run, proper now’s your probability to nab an amazing entry valuation.”
Quick-forward to the current, and it’s clear that Meta’s inventory was the truth is an amazing alternative.
Meta shares have now greater than doubled since I concluded that they had been an entire steal.
Extremely, after I really useful the inventory, it truly declined by one other 50% earlier than beginning its wonderful restoration.
This is a crucial reminder that nice investing requires a whole lot of persistence.
Selecting the underside on a inventory is unattainable. Discovering good worth isn’t.
How Does Meta’s Valuation Look Now?
Final Friday, Meta shares rocketed greater than 20% due to a fourth quarter 2023 earnings launch that the market clearly beloved.
In its launch, the corporate introduced a 25% enhance in revenues mixed with an 8% lower in prices.
It additionally delighted traders by revealing that it could start paying a dividend.
The 20% inventory transfer added an astonishing $196 billion to the corporate’s market capitalization.
That’s an all-time single-day report not only for Meta… however for your entire market.
This monumental enhance in Meta’s share value has additionally modified the inventory’s worth proposition.
As I mentioned above, after I first wrote about Meta, we may get shares for 17 instances earnings, which was far under the place the corporate had ever traded earlier than.
When the inventory lastly bottomed late in 2022, Meta shares might be had for lower than 10 instances earnings. That was a very epic shopping for alternative.
After final week’s leap, Meta is at present buying and selling at 31 instances trailing earnings.
And primarily based on its common 2024 earnings per share estimate of $19.53 and its share value of $470, it’s buying and selling at 24 instances ahead earnings.
To me, each of those numbers look about proper for the unimaginable money machine that Meta is.
In any case, an amazing firm ought to garner a high valuation.
I hope you made some cash on this one! We had an opportunity to purchase this dominant firm at an absurdly low-cost valuation.
That chance has handed, although, as a result of surge in Meta shares.
The Worth Meter now charges Meta Platforms as being “Appropriately Valued.”
If in case you have a inventory that you just’d prefer to have rated by The Worth Meter, go away the ticker image within the feedback part under.