Meta (NASDAQ:META) stock has extended its gains from the past year with another strong set of results. In post-market trading on Thursday (1 January), the tech giant’s stock surged by 12%, reaching around $454 per share. That’s up from $188 a year ago.
So, what does this mean for investors?
The results
Meta’s Q4 results beat expectations by some margin. The company’s earnings per share came in at $5.33 — ¢39 ahead of consensus expectations.
Likewise, Meta reported revenues of $40.11bn for the quarter, ahead of estimates by $940m and up an impressive 24.7% over 12 months.
This was driven by improved user figures including an 8% increase in daily active people (DAP) to 3.19bn and a 6% increase in monthly active people (MAP) to 3.98bn.
Meanwhile, ad impressions delivered across the business increased by 21% and the average price per ad increased by 2%.
Collectively, this strong increase in user activity and mild improvement in average achieved prices, led to strong guidance for the first quarter of 2024 and a dividend.
The Mark Zuckerberg-led company said that first-quarter 2024 total revenue would be in the range of $34.5bn-$37bn vs the $33.87bn consensus view. The company will also pay a ¢50 dividend per share on 26 March.
Too late to buy more?
Thankfully I already have a holding in Meta, and it’s done very well since I purchased the stock back in August 2023.
However, the company appears to be going from strength to strength. It beat earnings forecasts in all four of the quarters in 2023, and it’s guiding ahead of analysts’ consensus views again for Q1 2024.
A core part of this has been Zuckerberg’s efficiency drive. The quarterly report highlighted that headcount was 67,317 as of December 31 — a decrease of 22% year on year. As such, margins have improved significantly. The company’s operating margin now sits at 41%.
In fact, so effective has this productivity drive been over the past 12 months, Q1 2024 earnings estimates suggest a 95% increase in earnings per share.
So, am I too late to buy more? In my opinion, absolutely not. In fact, it’s still looking fairly inexpensive with a price-to-earnings-to-growth (PEG) ratio of 1.01.
Traditionally a PEG ratio under one suggests undervalued conditions, but it doesn’t perfectly take into account market dominance and anticipated earnings growth beyond five years.
It’s worth noting that Meta is also the cheapest of the so-called Magnificent Seven — the giant US-listed tech stocks.
Risks? There are always risks, such as regulatory changes that could affect it. Meta could also be adversely impact by currency fluctuations over the next year as monetary policies take a step change. Equally recessions aren’t good for ad spend.
Nonetheless, it continues to outperform, it’s dominant in its sector, and it’s undervalued compared to its big tech peers. If I had the capital, I’d buy more today.
