Only a handful of companies are part of the illustrious trillion-dollar club. Currently, all eyes are on Meta Platforms Inc (META, Financial), the comeback story that's left heads turning this year. This year, the stock is up more than 100% in value as the firm rapidly rewrites its narrative from past missteps.
Meta Platforms Inc (META, Financial)'s recent success is no fluke. Through a potent mix of astute AI investments and sharp cost-cutting measures, it showcased impressive business acumen that's hard to rival. Indeed, as the year unfolds, many industry insiders believe Meta Platforms Inc (META) is charting a course straight into the trillion-dollar echelons. With that said, let's dive a little deeper into Meta Platforms Inc (META)'s incredible growth story as it looks to push forward with aplomb.
Primary Division Reignites Growth in Its Impressive Year of Efficiency
Meta Platforms Inc (META, Financial) charted a bold course in late 2021, pivoting toward the metaverse. Though its strategic pivot was a nod to future-focused endeavors, its Reality Labs division, crucial to this vision, faced plenty of headwinds. Despite raking in a healthy $3.65 billion in sales, it registered an eye-watering $18.14 billion in operating losses since the fourth quarter of 2021.
However, Meta Platforms Inc (META, Financial)'s Family of Apps division remains a beacon of profitability. Boosted by ad revenue from giants including Facebook, Instagram, and the newer entrant, Threads, it reported a hearty 12% year-over-year bump in sales, touching a splendid $31.7 billion in the second-quarter. Moreover, the division's robust operating profit of $11.2 billion cushions the Reality Labs' slump.
Efficiency Measures and Profitability
On top of that, with CEO Mark Zuckerberg's "Year of Efficiency", Meta Platforms Inc (META, Financial) has added new layers to its bottom-line. True to his word, strategic workforce reductions and prudent funding cuts have spruced up the company's operating margins in recent quarters.
The company boasts a stellar track record, remaining profitable for a decade straight. Its trailing-twelve-month earnings-per-share stands at $8.58. Moreover, with an operating margin of 29.35%, Meta Platforms Inc (META, Financial) outperforms 83.73% of its peers in the interactive media sector. This places the tech titan's profitability at a remarkable 9 out of 10, marking it as an industry frontrunner.
Path To $1 Trillion Looks Clear
Meta Platforms Inc (META, Financial)'s profits have surged in a drive toward efficiency, paving its path to a $1 trillion valuation. Meta Platforms Inc (META) Stock is in for more extraordinary gains as it continues to grow profits and moves away from cash-burning endeavors. It attracts a GF Value of $333.10 at this time, making it modestly undervalued, offering roughly an 11% upside from its current price levels.
Investment heavyweight Morgan Stanley foresees the tech giant potentially earning up to $20 per share by 2024. This optimistic projection is underpinned by the company's dynamic trio: Reels, Click Messages, and the unwavering "core" ads segment. Analyst Brian Nowak, with a bullish stance and a $375 price target on Meta Platforms Inc (META, Financial) shares, highlighted the unexpected success of Reels monetization. Intriguingly, his estimates suggest that Reels is only tapping into approximately 28% of the core ad business's potential at the current stage, hinting at a vast untapped opportunity ahead.
Stock Valuation and Future Projections
Furthermore, the stock is currently trading at a P/E ratio of 34.81, higher than its 10-year median of 33.86. Moreover, with its P/E ratio ranked worse than 69.12% of the 285 companies in the interactive media sector, it's easy to conclude that the stock is undervalued.
However, if we factor in Nowak's prediction of forward earnings per share of $20, we are looking at a significantly attractive $14.93 per share. Additionally, if Meta Platforms Inc (META, Financial) is to achieve a trillion-dollar valuation, its stock must rise approximately 30% from its current price levels. Given a target stock price of $388 and its forward earnings-per-share at $20, Meta Platforms Inc (META) would be trading at a P/E ratio of 25.98, which is still significantly more attractive than its historical metrics and more in line with the sector median at 21.41.
Takeaway of META Stock
Meta Platforms Inc (META, Financial) is essentially a phoenix reborn from its previous identity, with its stock value skyrocketing by over 100% this year. Moreover, the company is charging forward, fueled by strategic AI forays and laser-focused cost-cutting strategies. With the momentum building, the tech behemoth seems poised to grace the trillion-dollar podium.
While Meta Platforms Inc (META, Financial)'s pivot to the metaverse brought challenges, its Family of Apps division is a testament to resilience and profit. Meta Platforms Inc (META) cushions its previous lapses by commanding a 12% year-over-year growth and securing a hefty $31.7 billion in the second-quarter.
Morgan Stanley's Brian Nowak remains optimistic, pegging the stock's potential at a whopping $20 per share by 2024. This forecast revolves around Meta Platforms Inc (META, Financial)'s powerhouses: Reels, Click to Message, and the bedrock, the "core" ad unit that continues to grow for its business. Furthermore, the stock's current P/E ratio is 34.81, suggesting overvaluation. Yet, if we embrace Nowak's projections, a delectable P/E of 25.98 beckons, aligning this with a potential 30% uptick in stock value.
