Meta Platforms, Inc.

FB Details

Meta Platforms, Inc. (NASDAQ: FB) formerly known as 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 segments are 1) Facebook Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp, and other services, and 2) Facebook Reality Labs (FRL), which includes consumer hardware, software, and content for 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 it 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 competes in the Communication Services industry against major players such as Alphabet, Amazon, Apple, ByteDance, and others who have more financial and operational resources across all segments. Competitors' advanced innovation or superior product development could harm its operations.

Outlook:

• Q1FY22 Guidance: As of FY21, FB expects to clock revenue of USD 27 – 29 billion in Q1FY22, representing YoY growth of 3% – 11%.  
• Capex Guidance: FB expects to spend USD 29–34 billion on capital expenditures, including principal payments on 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 8.66% in the past one month and is currently leaning towards the lower end of its 52-week range of USD 185.82 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 247.21.

Considering the slight correction in the stock price, debt free company, solid financial performance, major player in the communication services industry, encouraging outlook, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 219.57, up 2.86% as of March 24, 2022.

Three-Year Technical Price Chart (March 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.