Meta Platforms Shares Soar with Lower Spending, Boosted Buyback Plan

Meta Q1 Earnings Preview: Top Analysts Bullish Ahead of Report

Meta Platforms Inc (NSD:META) shares surged 20% in pre-market trading after the social media giant declared its plans to decrease its spending forecast and increase its stock buyback plan by $40 billion. The company aims to reduce costs, with positive revenue growth and share buybacks that are expected to drive up earnings per share. The announcement was a positive contrast to Snap Inc’s (NYE:SNAP) earnings meltdown, boosting shares of Amazon.com (NSD:AMZN), Apple Inc (NSD:AAPL) and Alphabet Inc (NSD:GOOGL). CEO Mark Zuckerberg referred to 2023 as the “Year of Efficiency” and the company predicted 2023 expenses between $89 billion and $95 billion, down from its previous estimate of $94 billion to $100 billion. The forecast shows savings from job cuts, lower data-center expenses and the discontinuation of non-critical projects. Analysts at Evercorse ISI noted the combination of reduced costs, strong revenue growth and share buybacks as rare and stocks react positively to rarity. Also, Meta’s core social media business is showing improvement, with monetization efficiency of Facebook’s short-form video Reels doubling and the business projected to break-even by the end of 2023.

Meta Platforms Inc. stock analysis:

59 analysts have predicted a 12-month target price for Meta Platforms Inc. shares of USD 158.68. The consensus recommendation among Wall Street analyst ratings is to Strong Buy Meta Platforms Inc. Based on 10 positive indications and 4 negative signals, Stock Target Advisor rates Meta Platforms Inc. as Bullish. On Friday, shares of Meta Platforms Inc. closed at USD 153.12. During the past week, shares of Meta Platforms Inc. have increased by 11.62 percent, during the past month by 32.78 percent, and during the past year by 1,143.87 percent.

 

We favour companies with:

substantial market caps.

The organisation ranks in the upper quarter of its industry’s major companies. Such businesses are more likely to succeed.

Excellent returns relative to risk

The stock is in the top quartile of its industry’s performers (after adjusting for risk) and has done very well relative to its peers (after being held for at least a year).

Extensive profit margin

In each of the last four quarters, the company’s management has increased the return on equity at a rate that places it in the top quartile in its industry.

Extraordinary return on investment

Over the past four quarters, the company’s management has generated a higher return on invested capital than its competitors.

Better than average rate of return

In each of the last four quarters, the company’s management has increased its return on assets, placing it in the top 25% of its industry.

Profitable cash flow

In each of the past four quarters, the company has posted net cash inflow.

Profitable free cash flow

All four quarters in the most recent year saw a positive total free cash flow for the company.

Excellent Profit Increase

When comparing earnings growth over the past 5 years to the rest of the sector, this stock is in the top 25%.

Excellent Sales Expansion

Compared to other companies in its industry, this stock’s revenue growth over the past five years ranks in the top quartile.

Large Ratio of Gross Profit to Total Assets

When compared to its industry peers, this stock’s Gross Profit to Asset Ratio ranks in the top 25%. Long-term superior returns are demonstrated, making this a popular metric among value investors.

 

We strongly dislike:

High volatility

This company has had total returns that are highly volatile and significantly higher than the sector median over the past five years. You should evaluate your comfort level with risk before committing money to such a stock.

Excessive in price compared to its book value.

In terms of price to book value, the stock is trading at a premium to its peers’ median.

Cash-flow valuation: too high

When compared to similar companies, the stock is trading at a premium to its peers on a price-to-cash-flow basis. Its price tag is higher than average for its industry. If you’re thinking about making a purchase, proceed with caution.

When considering free cash flow, the price is too high.

On a price-to-free-cash-flow basis, the stock is selling for a premium to its competitors. Its price tag is higher than average for its industry. If you’re thinking about making a purchase, proceed with caution.

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