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Elevator Pitch

I continue to rate Meta Platforms, Inc.’s (NASDAQ:FB) shares as a Buy.

I emphasized that I was “still positive on Meta’s intermediate-term business outlook” despite “the Giphy deal getting blocked” which “brings antitrust issues for Meta Platforms into the spotlight” in my prior December 14, 2021 article.

In the current article, I reason that there is a good chance of Meta Platforms’ shares breaching the $400 mark in the future. I see FB delivering better-than-expected results for FY 2022 by tackling IDFA issues effectively and executing well on its new products. More importantly, it is not unreasonable for Meta Platforms’ stock price to go to $400 and above, as that would only be equivalent to its shares trading at forward P/E multiples in the twenties.

What Is Meta Platforms Stock’s Price Target?

Meta Platforms’ Wall Street analyst consensus average price target has increased from below $320 at the beginning of last year to $402.68 as of the time of writing. In other words, the sell-side expects Meta Platforms’ stock price to go above the $400 level.

Changes To FB’s Market Consensus Price Target In The Past One Year

Changes To FB


Source: Seeking Alpha’s Wall St. Analysts Rating Data For Meta Platforms

FB’s current consensus target price of $402.68 is +21% higher as compared to the company’s last traded share price of $333.26 as of January 12, 2022. The most bullish analyst on the Street sees Meta Platforms’ stock price rising to as high as even $466.00, which would translate into an upside potential of +40%.

Meta Platforms’ Sell-Side Analyst Target Price Range

Meta Platforms


Source: Seeking Alpha’s Wall St. Analysts Rating Data For FB

In the subsequent section of the article, I touch on what could help to re-rate Meta Platform’s share price in the near term.

Is FB Stock Likely To Rise?

FB stock is likely to rise going forward, as market expectations are low and the company has a good chance of achieving positive surprises.

As per the charts below, most of the Wall Street analysts have revised downwards their respective annual and quarterly revenue and EPS estimates for Meta Platforms in the past three months.

Sell-side Analysts’ Revisions To Meta Platforms’ Quarterly And Yearly Financial Forecasts In The Last Three Months

Sell-side Analysts


Sell-side Analysts


Source: Seeking Alpha’s Earnings Revisions Data For FB

Specifically, the market consensus sees FB’s top line expansion slowing from +36.9% in FY 2021 to +19.0% in FY 2022 as per S&P Capital IQ data, while the company’s normalized EPS growth is predicted to go from +38.3% to +2.9% over the same period. It is clear that the sell-side has modest expectations of Meta Platforms’ financial performance in 2022.

There are two key factors that could lead to Meta Platforms delivering better-than-expected top line and bottom line growth in 2022.

The first factor relates to IDFA (The Identifier for Advertisers) headwinds relating to privacy changes for Apple’s (NASDAQ:AAPL) iOS.

At its Q3 2021 earnings call, Meta Platforms acknowledged that its Q4 2021 revenue guidance ($31.5-$34.0 billion) implies “lower sequential growth than we’ve seen historically.” FB specifically highlighted that this “reflects some of the uncertainty” with respect to “the iOS 14 and ATT (App Tracking Transparency) and IDFA impacts” on “pricing during the holidays.” This is one of the key reasons why FB’s revenue and earnings estimates for Q4 2021 and 2022 have been cut in the past three months.

On the flip side, FB stressed at the third-quarter investor briefing that the company’s targeting is still “very good for advertisers” as evidenced by its “ROI” or Return On Investment metrics. Notably, it also added that “the question for us is how good our targeting can be compared to others.” In my earlier October 7, 2021 article on Meta Platforms, I also mentioned that FB’s “access to a significant amount of first-party data and its size of its user base should allow the company to adapt to these changes and emerge stronger as compared to its smaller competitors.”

If Meta Platforms is able to address IDFA-related issues and headwinds more effectively and in a shorter period of time than expected, there could be upside to FB’s future financial performance which will serve as a key re-rating catalyst.

The second key factor is better-than-traction for Meta Platforms’ new products. Specifically, I am positive on Instagram Reels and Shops.

I noted in my previous October 7, 2021 article that Instagram Reels “will surprise the market in terms of active user numbers, advertiser take-up and monetization rates”; while I wrote in the same article that “it is reasonable to expect the growth of Shops to translate into significant top line expansion associated with greater ‘eyeball reach’ and fees positively correlated with transaction volumes.” My favorable views with respect to both of these new products have remained the same since my earlier article.

Meta Platforms’ comments at the company’s most recent Q3 2021 earnings briefing validate my positive expectations regarding the future growth outlook for FB’s new products like Instagram Reels and Shops. FB disclosed that it is “working closely with a number of the businesses that have invested the most in Shops to identify what works” with plans to “scale those solutions more broadly in 2022.” Separately, Meta Platforms revealed that it is engaged in “ongoing product enhancements” for Instagram Reels, and stressed that products like Reels help to “attract” and “retain the younger demographics.”

In other words, Shops could help FB to exploit e-commerce growth opportunities, while Instagram Reels will ensure that the company does not cede market share to rivals focused on younger users.

Similar to the first factor, if Instagram Reels and Shops perform well, Meta Platforms is in a good position to achieve better-than-expected financial results in 2022.

In conclusion, I think that FB stock is likely to rise in 2022, considering low market expectations and the high likelihood of above-expectations financial performance due to the two key factors mentioned above.

Can FB Stock Reach $400?

In my opinion, the $402.68 average price target for Meta Platforms outlined earlier is realistic.

The mean sell-side consensus target price translates into reasonably attractive consensus forward fiscal 2022 and 2023 normalized P/E multiples of 28.0 times and 23.9 times, respectively based on data sourced from S&P Capital IQ data.

In comparison, the company’s shares have traded at a much higher average consensus forward next twelve months’ normalized P/E multiple of 33.0 times (as per S&P Capital IQ data) since it was listed in May 2012.

Is FB Stock A Buy, Sell, Or Hold?

FB stock is a Buy, because I believe its share price can rise above $400 in 2022, which suggests a minimum +20% upside. The forward P/E multiples implied by a $402.68 price target price are undemanding, while expectations for Meta Platforms are modest as seen with recent revenue and EPS forecast reductions.

— to seekingalpha.com

The post Can Meta Platforms Stock Reach $400 Levels? (NASDAQ:FB) appeared first on Correct Success.

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