Meta Platforms, Inc.

FB Details

Meta Platforms, Inc. (NASDAQ: FB) formerly Facebook Inc. focuses on developing technologies that allow people to interact and share via mobile devices, personal computers, virtual reality headsets, and in-home devices. Its operating segment are 1) Family of Apps (FoA), which offers Facebook, Instagram, Messenger, WhatsApp and other services and 2) Facebook Reality Labs (FRL), which comprises of consumer hardware, software, and content linked to augmented and virtual reality.

FY21 Results:

• Surge in Topline: The company reported YoY growth of 37.18% in revenue to USD 117.93 billion in FY21 (ended December 31, 2021) from USD 85.97 billion in FY20. The FoA segment, which accounted for 98.07% of the total revenue in FY21, increased 36.34% YoY, attributable to 36.55% growth in Advertising revenue (which constituted 97.46% of the total FoA segment revenue in FY21) driven by higher ads delivered and favorable average price per ad.
• Growth in Profitability: In FY21, FB's net income increased to USD 39.37 billion from USD 29.15 billion in FY20.
• Strong Balance Sheet: As of December 31, 2021, the company had cash and cash equivalents (including short-term investments) of USD 48.0 billion and no outstanding debt.
• Share Repurchases: In FY21, FB repurchased 136 million common shares for an aggregate consideration of USD 44.81 billion. The company had the remaining USD 38.79 billion available under its repurchase authorization at the end.

Key Risk:

• Regulatory Risk: FB operations are subject to extensive and volatile regulations regarding privacy, data use and data protection, content, competition, safety and consumer protection and other related areas, which are also complex in interpretation. The issuance of stricter regulations or non-compliance with required laws could adversely affect the company’s reputation, revenues, and earnings.
• Competition Risk: FB operates in the Communication Services industry and faces direct competition from significant players like Alphabet, Amazon, Apple, ByteDance and others with higher financial and operational resources at their disposal across its segments. Any advanced innovation or superior product development by its competitors could impact its operations.

Outlook:

• Q1FY22 Guidance: As of FY21, FB expects to generate revenue of USD 27 – 29 billion in Q1FY22, representing YoY growth of 3% – 11%.  
• Capex Guidance: FB expects to incur capital expenditure of USD 29 – 34 billion including principal payments on the finance leases.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

FB's stock price has fallen 37.80% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 230.11 to USD 384.33. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 280.17.

Considering the significant correction in the stock price, debt free company, robust financial performance, dominant player in the communication services industry,  promising outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 224.91, down 5.14% as of February 07, 2022.

Three-Year Technical Price Chart (as on February 07, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

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