What's Going On With META Stock?
An illustration photograph taken on April 17, shows the Facebook app available to download from the ... More App Store displayed on a phone screen, in a residential property in Guildford, south of London. (Photo by Justin TALLIS / AFP) (Photo by JUSTIN TALLIS/AFP via Getty Images)
Meta Platforms' stock has declined approximately 13% this year, facing headwinds from potential tariff impacts that could affect the company in two significant ways:
Despite this year's setback, Meta has demonstrated remarkable resilience over a longer timeframe, with the stock gaining 56% since early 2022, substantially outperforming the broader Nasdaq index's modest 7% increase. This outperformance can be attributed to several key factors:
Meta Platforms has delivered impressive revenue growth of 39%, increasing from $118 billion in 2021 to $165 billion in the trailing twelve months. This robust performance stems from multiple growth drivers:
Meta's profitability metrics show substantial improvement, with the net income margin expanding from 33.4% in 2021 to 37.9% currently. This enhanced profitability is complemented by a strategic 9% reduction in shares outstanding, made possible by the company's substantial $122 billion investment in share repurchases.
The combination of higher revenues, expanded margins, and fewer outstanding shares has resulted in a 73% increase in earnings per share, rising from $13.77 in 2021 to $23.86 in the most recent period.
Despite Meta's impressive financial performance across revenue growth, margin expansion, and earnings improvement, its P/E ratio has declined by 10%. This valuation compression can be attributed to several factors:
Given these uncertainties, investors should ask themselves critical questions: Do you want to hold on to your META stock now? Will you panic and sell if it starts dropping further?
Holding on to a falling stock is never easy. While META remains fundamentally strong with impressive growth and improving profitability, investors seeking to preserve wealth in volatile markets might consider alternative strategies. Trefis works with Empirical Asset Management—a Boston area wealth manager—whose asset allocation strategies yielded positive returns even during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics..
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