Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

Earnings Analysis

Meta Platforms Stock: I Am Buying The Panic

Aggressively
Oct. 31, 2022 11:21 AM ET | Meta Platforms, Inc. (META) | 54 Comments | 6 Likes

On the Pulse
5.46K Followers

About this article

Ticker Author rating Price at publication Last price Change since publication S&P 500 change since publication
META Buy - $92.82 - -

Summary
Social media company Meta Platforms faces slowing sales growth.

The market panicked after seeing the Meta sales forecast.

Meta Platforms stock is at its most attractive valuation in years.

1 of 6 01/11/22, 00:40
Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

Derick Hudson

Third quarter earnings of Meta Platforms, Inc. (NASDAQ:META) were not great amid slowing
growth, but the degree to which the stock sold off post-earnings strongly suggests that the
market has lost its senses about the fundamental value of the stock.

The social media company saw a 25% valuation cut after earnings, and while the fourth-
quarter sales growth forecast is soft, I believe investors are making a big mistake by ignoring
META at such a compelling valuation. I'll keep buying as long as the market panics.

Investors Panic Over Earnings Miss And Meta’s Q4 2022

Forecast
Meta generated $27.71 billion in sales in the September quarter, a 4% decrease YoY. The sales
decline was predicted based on Meta's previous quarter guidance.

At the same time, earnings per share fell 49% to $1.64 from $3.22 in the previous quarter.
Meta fell 25 cents short of the average earnings forecast of $1.89 per share, resulting in a
major stock meltdown following earnings.

Q3-22 Financial Highlights (Meta Platforms Inc)

2 of 6 01/11/22, 00:40
Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

What investors were most interested in was the sales forecast. According to guidance, Meta
expects total sales to be in the $30-32.5 billion range, implying that sales will continue to fall in
the fourth quarter amid a global correction in digital advertising.

Because investors are hypersensitive to uncertainty and slowing sales growth, I can
understand how the market reacted after earnings were reported. Having said that, the market
is still vastly overreacting to the forecast.

Meta Lost About A Quarter Of Its Market Value And The Stock
Is Now Oversold
Meta lost roughly a quarter of its market value after earnings, which I believe is not only
exaggerated, but unwarranted. Meta is profitable, and the advertising business is still
profitable for the social-media company.

Meta earned $4.40 billion in net income in the third quarter and remains the world's largest
social media company, with nearly 3 billion daily active users. A daily active person is someone
who is registered and logs in to Facebook, Instagram, Messenger, and/or WhatsApp on a daily
basis.

Daily Active People (Meta Platforms Inc)

Meta's stock dropped 25% after an investor panic caused the stock to become oversold.
According to the Relative Strength Index, the stock is now significantly oversold, which could
be interpreted as a contrarian buy signal.

3 of 6 01/11/22, 00:40
Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

RSI (StockCharts.com)

Reels And TikTok-Style Short-Video Formats Are The Future

TikTok is the most popular social media platform right now, with over 1 billion active users,
many of whom share user-generated content in the form of short videos.

In my article, "Meta Platforms Stock: Q1 Could Be The Most Important Quarter Ever," I
highlighted the risk that TikTok represents for Meta. In recent years, no other social-media app
has grown as quickly as TikTok.

The Rise Of TikTok (FT Research)

The rise of TikTok is obviously a problem for Meta, despite the fact that its total user count has
continued to rise in the last quarter. With TikTok gaining traction, Meta may need to either
double down on its investments/scale of the Facebook Reels or find a way to improve
monetization.

4 of 6 01/11/22, 00:40
Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

In my opinion, Facebook's focus on the metaverse is a huge disadvantage, and the time and
resources spent on the metaverse would be better spent growing the appeal of Facebook's own
short-video streaming product.

Meta Is A Steal
Despite being the world's leading social-media company and producing an ungodly number of
sales and profits every quarter, Meta's collection of social media apps and platforms is
currently valued at less than 10x earnings. The panic has reduced Meta's earnings multiple to
9.5x, down from 24x at the start of 2022. In my opinion, the stock is a total steal.

PE Ratio (YCharts)

Why Meta Might See A Lower/Higher Valuation

Meta's sales expectations for 4Q-22 were disappointing, but there was probably a lot of panic
involved in Meta's 25% valuation haircut, which is why I think the stock is interesting in the
first place.

Yes, large social-media companies may be unable to avoid the correction in the advertising
landscape, but a company the size of Meta should be able to weather the downturn better than
any other.

My Conclusion
The 25% valuation cut for Meta's stock last week, in my opinion, is greatly exaggerated and
unjustified. Yes, Meta is experiencing some difficulties in its advertising business, but which
company isn't these days?

This is what truly matters. Meta has nearly 3 billion daily active users on its platforms and
generated $27.71 billion in revenue while profiting $4.40 billion.

Despite a sales slowdown, the social media company is expected to remain profitable. And this
company is selling for only 9.5 times earnings? I'm taking advantage of the panic and buying
Meta Platforms hand over fist.

This article was written by

On the Pulse
5.46K Followers

A financial researcher and avid investor with a keen eye for innovation and disruption, as well as growth buy-outs and
value stocks. Keeping an eye on the pace of high tech and early growth companies, I write about current events and the

5 of 6 01/11/22, 00:40
Meta Platforms Stock _ I Am Buying The Panic Aggres... https://seekingalpha.com/article/4551107-meta-platfo...

Show More

Disclosure: I/we have a beneficial long position in the shares of META either through stock ownership, options, or other derivatives. I wrote
this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no
business relationship with any company whose stock is mentioned in this article.

Comments (54) Sort by Newest

6 of 6 01/11/22, 00:40