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Meta Stock Crashed Despite Revenue and Earnings Beat
- Authors
- Name
- Solo FIRE
Meta Platforms META reported revenue growth of 27% and EPS increased by 114% YoY. A discounted cash flow (DCA) using the latest TTM net income gives an estimated value of $435.29 for the stock with the following assumptions:
- Latest TTM net income of $45.76 Billion
- Future PE ratio of 20 (5YR average is 23.8)
- Annual net income growth rate of 12% (5YR average, I expect this to be higher in the future)
- Annual share repurchase of 1.75% of total shares (5YR average)
- Discount rate of 10
After the 15% afterhours crash, the stock will be selling at a lower price than the above conservative estimate, indicating a better potential future return. I believe the decline is due to higher than expected future spending towards AI and reality labs. I personally think Meta had a great quarter and the market crash is unreasonable, given that the company had invested shareholders' capital at a high ROIC at 27% on average for the past 5 years, it is reasonable to expect the additional investment will yield satisfactory returns over the long term.
In conclusion, I think the stock is more attractive to hold current and will consider buying more if the price declines further.
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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.