Going into February 2022, shares of Meta Platforms (Nasdaq: META) had been almost minimize in half over the prior six months.
The steep drop in inventory worth had my contrarian instincts tingling.
After 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 folks use not less than one app in its “household” of apps, which incorporates Fb, Instagram, Messenger and WhatsApp.
Which means nearly half of all folks on the planet had used a Meta app!
On prime of that, Meta’s inventory market valuation regarded 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 embrace 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 stream from operations in 2021 and had a whopping $50 billion in money on its unimaginable stability sheet.
I additionally liked 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 might decline additional within the quick time period, however I feel within the medium to long run, proper now could be your likelihood to nab an awesome entry valuation.”
Quick-forward to the current, and it’s clear that Meta’s inventory was the truth is an awesome 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 really declined by one other 50% earlier than beginning its superb restoration.
This is a crucial reminder that nice investing requires a number of endurance.
Choosing the underside on a inventory is not possible. 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 liked.
In its launch, the corporate introduced a 25% improve in revenues mixed with an 8% lower in prices.
It additionally delighted buyers by revealing that it could start paying a dividend.
The 20% inventory transfer added an astonishing $196 billion to the corporate’s market capitalization.
This huge improve in Meta’s share worth has additionally modified the inventory’s worth proposition.
As I mentioned above, after I first wrote about Meta, we might get shares for 17 instances earnings, which was far beneath 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 really epic shopping for alternative.
After final week’s leap, Meta is presently 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 worth 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 spite of everything, an awesome firm ought to garner a prime 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.”
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