Stock Analysis & Ideas

Meta Platforms: Wide Moat, More Growth Ahead

Meta Platforms (FB), formerly called Facebook, is a social networking company that creates different applications to connect people worldwide. The company was founded on the 4th of February, 2004 by Mark Zuckerberg, Eduardo P. Saverin, Dustin Moskovitz, Andrew McCollum, and Chris R. Hughes. 

I am bullish on Meta Platforms as it has a strong competitive position, a promising long-term growth runway, and reasonable valuation multiples relative to the company’s trading history.

On top of that, Wall Street analysts are overwhelmingly bullish on the stock, and the average analyst price target implies substantial upside over the next year.


According to Forbes, Facebook is the fifth-most valuable brand globally, with a valuation of $88.9 billion. In the social media industry, few can match its stride. Moreover, the company is also leading the next generation of connectivity through its virtual reality initiatives.

Meta also reported that its investment into Facebook Reality Labs will decrease its operating profit by $10 billion. However, this is a risk that the company is willing to take since it has a long-term vision to increase its investments into this platform for the following years.

Another notable strength of Facebook is its diverse collection of platforms (Instagram, Workplace, Calibra, Oculus, Messenger, WhatsApp, and several others).

Recent Results

In the quarter that ended on the 30th of September 2021, Meta Platforms reported that its daily active users (1.93 billion) had gone up by 6% compared with the number of users at the same time last year. Its capital expenditures in the third quarter were $4.54 billion, and it also repurchased $14.37 billion of its Class A common stock.

In the upcoming fourth quarter, Meta Platforms is expecting to see revenue of $31 to $34 billion (according to the CFO), and it also expects its tax rate for the fourth quarter to be in the high-teens. The company reported that in the initial months of 2022, it will incorporate two new financial segments into its structure: Facebook Reality Labs and Family of Apps.

Valuation Metrics

FB stock looks reasonably priced at the moment. Its EV/EBITDA ratio is roughly in line with its history at 13.3 times compared to its historical average of 13.9 times.

Furthermore, its forward price-to-normalized-earnings ratio is 24 times compared to its historical average of 25 times. Analysts expect the company to see revenue, EBITDA, and normalized earnings-per-share growth in 2022 of 19%, 5.4%, and 2.9%, respectively.

Wall Street’s Take

Turning to Wall Street, FB earns a Strong Buy consensus rating based on 26 Buys and five Hold Ratings assigned in the past three months. Additionally, the average Meta Platforms price target of $406.92 puts the upside potential at 23.5%.

Summary and Conclusions

Meta Platforms benefits from its core Facebook business, which enjoys a very wide moat, substantial profitability, and steady growth. Moving forward, the company plans to leverage its brand and massive network to become a leading player in the metaverse, where it sees massive growth potential.

Given that analysts are overwhelmingly bullish on the stock here, the valuation multiples look very reasonable relative to historical levels, and the average price target implies substantial upside over the next year, it looks like it might be a good time for investors to consider adding shares.

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