Meta Platforms (META) has been one of the most popular stocks among Zacks.com visitors recently, so it is a good idea to take a look at some factors that could impact the stock's near-term performance.
Shares of the social media company have risen +11.9% over the past month compared to a +3% gain for the Zacks S&P 500 Composite Index. The Zacks Internet – Software industry, which Meta Platforms belongs to, has gained 8.6% in that period. The big question here is, where is this stock headed in the near term?
Media announcements or rumors of significant changes in a company's business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company's future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company's earnings forecast goes up, the fair value of its stock also goes up. And if a stock's fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Meta Platforms is projected to post earnings of $5.14 per share, which would represent a +17.1% change from the year-ago period. The Zacks Consensus Estimate has changed +5.5% within the past 30 days.
The consensus earnings estimate for the current fiscal year is $21.30, indicating a change of +43.2% year-over-year. This estimate has changed +5.3% over the past 30 days.
Looking at the next fiscal year, the consensus revenue estimate is $24.07, representing a +13% change from what Meta Platforms was expected to report a year ago. Over the past month, estimates have changed +2.8%.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned Meta Platforms a Zacks Rank #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Projected Revenue Growth
Revenue growth is arguably the best indicator of a company's financial health, but if a company can't grow its revenue, then nothing happens. After all, it's nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it's important to know a company's revenue growth potential.
For Meta Platforms, the consensus revenue estimate for the current quarter is $40.08 billion, indicating a change of +17.4% year-over-year, while estimates for the current and next fiscal years are $161.62 billion and $184.01 billion, indicating changes of +19.8% and +13.9%, respectively.
Last reported results and surprise history
Meta Platforms reported revenue of $39.07 billion in the most recent quarter, up 22.1% from the same period last year. EPS was $5.16 for the quarter, up from $3.23 in the same period last year.
Compared to the Zacks Consensus Estimate of $38.34 billion, reported revenues represented a surprise of +1.91%. EPS surprise was +9.79%.
The company has beaten consensus EPS estimates in each of the last four quarters, and revenue also beat consensus estimates in each quarter during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock's current price properly reflects the intrinsic value of its business and the company's growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
Meta Platforms is rated a C in this regard, indicating that it is trading in line with its peers. Click here to see the values of the metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz around Meta Platforms is worth following, however, its Zacks Rank #3 suggests that Meta Platforms is likely to perform in line with the overall market in the near term.
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