The latest stock market correction has negatively affected even the most dominant technology companies. Shares of the titanic social media meta-platforms (target -1.01%) have plummeted 51% since the beginning of the year. High inflation, a rising interest rate environment and the war in Ukraine have caused a massive shift of technology companies to safer assets like bonds and value stocks.
While the Mark Zuckerberg-led business is facing its fair share of headwinds at the moment, investors should be confident that the company will make a satisfactory comeback in the long run. Along those lines, here are three reasons why astute investors should invest in the king of social media right now.
Reading: Is meta a buy now
1. meta has a good deal
after delivering a lackluster earnings report to close out 2021, meta bounced back nicely in its first quarter this year. Total revenue grew 7% year over year to $27.9 billion, in line with Wall Street estimates. Diluted earnings per share contracted 17.6% to $2.72, beating consensus forecasts by 8.1%.
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Daily active users on the Facebook platform increased 4.4% to 1.96 billion, and monthly active users increased 2.9% to 2.94 billion. On the earnings call, Zuckerberg mentioned a mix of growth headwinds at the moment, most notably, meta’s transition to short-form video, apple‘s ios privacy changes, the softness in electronic commerce and the harmful side effects of the invasion of ukraine by russia.
These obstacles appear in nature in a very short time. I still see a business that serves more than a third of the world’s population monthly, has $14.9 billion in cash and cash equivalents, and generated nearly $40 billion in free cash flow (FCF) over the last 12 months.
is easily the world’s largest social media platform, enjoying a 37% market share and generating $27 billion in ad revenue in the last quarter alone, more than twitter and snap full-year 2021 combined ad sales. The current target situation is not ideal, but the social media giant is well-equipped to weather any economic storm.
2. the metaverse revolution is here
If you don’t already know it by name and stock price, meta plans to be a key player in furthering the development of the metaverse. Still in its infancy, the metaverse can be defined as a digital world powered by virtual reality (VR), augmented reality (AR), artificial intelligence (AI), blockchain, and other computing technologies. Meta’s Reality Lab operating segment, which produces virtual reality and augmented reality hardware and software, generated just $695 million in revenue in the first quarter, equal to 2.5% of total sales.
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At the same time, the segment suffered an operating loss of $3 billion, showing that its metaverse business will take time to develop. however, investors shouldn’t worry too much, because the company has a strong core business and lots of cash on hand to comfortably invest in the growing segment.
Furthermore, according to precedence research, the global metaverse market size is expected to expand at a compound annual growth rate (CAGR) of 51% through 2030, reaching $1.6 trillion. That represents staggering growth, and while the meta reality lab business is currently operating at a loss, the company is well-positioned to capture a solid share of the market in the coming years.
3. favorable rating
Thanks to the recent sell-off, the meta is now trading at a low valuation. today, the stock has a forward price-to-earnings multiple of 14.3, indicating a significant discount to its five-year average of 27.9. that seems like an exceptionally low valuation for one of the world’s top tech companies. In addition to its best-in-class core advertising business, the company enjoys a long path of growth in its youth reality lab segment.
At existing levels, meta is an obvious buy and gives investors a very strong margin of safety. Even if you’re not a fan of the company’s metaverse transformation, you’re still investing in a highly profitable, cash-generating business that sits at the top of the massive social media industry. meta could create fortunes in the future for those who invest in stocks today.
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