It’s too early to give up on this tech company.
It’s only March, but stock markets have been plenty busy this year already. Major market indices have mostly been southbound due to impending interest hikes in the U.S. coupled with geopolitical tension. Moreover, growth stocks have led the market’s decline.
However, these developments have created opportunities for long-term investors. There are plenty of excellent growth stocks that now trade at attractive valuations. One example is Facebook’s parent Meta Platforms ( FB -1.66% ). Here’s why the tech giant is a screaming buy this month. Image source: Getty Images. Meta Platforms looks cheaper than it has in a while
The hallmark of a growth stock is that it is increasing its revenue or profits at a higher rate than its industry’s average. This factor often leads to inflated expectations among investors, who end up bidding up shares of the company in question. That’s why growth stocks often look very expensive, at least when going by traditional valuation metrics such as the price-to-earnings (P/E) ratio, the forward P/E, or the price-to-earnings growth (PEG).
In the past five years, Meta Platforms has generally traded at a premium, but the company now looks cheaper than it has in some time. Data by YCharts .
Meta Platforms’ P/E is near a 5-year low, while its forward P/E is near a 52-week low. The tech company’s PEG stands well below 1, which is generally considered the “attractive value” range. Meta Platforms also looks reasonably valued compared to the S&P 500 , which has an average forward P/E of 22.35.
Of course, maybe Meta Platforms looks cheap for a reason — perhaps the market no longer sees significant growth potential for the company. If that’s the case, it’s a mistake, and opportunistic investors had better take advantage of this opportunity to purchase Meta Platforms’ shares. Let’s look at a couple of lucrative opportunities Meta Platforms is looking to tap into. The future is bright
Meta Platforms currently generates the bulk of its revenue from its advertising business. However, Apple ‘s recent changes to its smartphone operating system gave users more privacy by allowing them to turn off data tracking. These changes have made it harder for companies to run targeted ads, affecting Meta Platforms’ revenue. The company thinks these obstacles will continue to weigh on its top line in 2022.
However, Meta Platforms has started to adjust its ad strategy to deal with these issues. One way it is doing so is by releasing tools to help advertisers measure the performance of their ad campaigns, which Apple’s changes made harder. Online advertising is still in growth mode. According to some estimates, the industry will expand at a compound annual growth rate of 14.3% through 2026.
Meta Platforms had 3.59 billion monthly active users in its family of websites and apps (including Facebook, Messenger, WhatsApp, and Instagram) as of the end of 2021, which represented a 9% year-over-year increase. The company could have about half of the population of the world visiting one of its platforms at least once per month within a couple of years. This ecosystem is far too juicy for advertisers to pass up.
As Meta Platforms adapts to Apple’s changes, expect its ad revenue to continue growing at a good clip. Further, the company released Facebook Reels, a short video feature to compete with TikTok. Again, the company’s massive userbase will likely mean that Reels will become at least somewhat popular. Meta Platforms called Facebook Reels its “fastest-growing content format.”
Meta Platforms’ metaverse ambitions are also worth mentioning. According to Wall Street analyst Eric Sheridan, the company is investing heavily in this opportunity, which could be an $8 trillion opportunity. Meta Platforms is approaching the metaverse through different angles. Virtual Reality (VR) devices will likely be instrumental in accessing the metaverse, and Meta’s Oculus is one of the leaders in this segment. Meta Platforms is also looking to develop the software necessary to support the metaverse.
It will be a while before this opportunity becomes profitable, but the rewards could vastly exceed the costs. And that’s before we get into Meta Platforms’ e-commerce ambitions, yet another potentially lucrative opportunity for the company to pursue. Meta Platforms still looks like it has plenty of growth avenues ahead despite the headwinds. Look beyond the current headwinds
There is no doubt that Meta Platforms is facing obstacles. However, the tech company is looking to address these issues to ensure its core business remains strong. At the same time, Meta Platforms is looking to tap […]
It’s too early to give up on this tech company.