Ahead of its then-upcoming quarterly earnings release, I discussed how there were high expectations for Meta Platforms (NASDAQ:META) to wow the market with its latest numbers and guidance, resulting in a big jump for META stock.
As you likely know, these expectations were more than met. Thanks to a well-received earnings report last week, shares in the Facebook and Instagram parent have jumped back above $300. On July 28, the stock hit yet another all-time high ($326.20 per share).
META has slid slightly lower, but remains near its latest high water mark. Whether or not you currently own it, chances are you are wondering what is the best move today.
Should new investors jump in? Should existing investors take profit? Is it best for all investors to take profit/stay away, ahead of a serious reversal? Let’s take a look at the latest developments, and find out.
META Stock and its Recent Earnings Topper
On July 26, Meta Platforms released its earnings report for the quarter ending June 30, 2023. For the period, Meta reported around $32 billion in revenue. This came in nearly $1 billion above sell-side forecasts.
Earnings of $2.98 per share beat estimates, which called for META stock earnings of $2.91 per share for the June quarter. While margins held steady, improvements in digital advertising demand resulted in a return to double-digit revenue growth, leading to a 16% year-over-year jump in profitability.
Besides this growth reacceleration, something outside of the results themselves help to spark the market’s bullish reaction to the report. That would be the numerous promising takeaways from the company’s updates to guidance. For instance, Meta revealed that Reels is definitely giving TikTok a run for its money, with the short-form video application now generating significant revenue.
Meta is also working to monetize its just-launched Threads application (a possible “Twitter killer”). Similar to Reels, this too could quickly become a major revenue generator. Most importantly, the company announced plans to further invest in its artificial intelligence (or AI) capabilities. This points to even more monetization improvements ahead, across all of Meta’s social media platforms.
What Comes Next?
While not for certain, chances are the market has now fully absorbed the impact of the above-mentioned earnings report on META stock. Again, as shares have moved higher on the news, and in more recent trading days have moved slightly back, you are likely wondering what comes next.
Could shares fall back below the $300 mark? It’s possible, but despite recent talk among some that this stock has become “overvalued,” I beg to differ. Given the company’s growth prospects, and its current forward earnings multiple of 23.8, assuming further news out of the company stays positive, $300 per share could emerge as a new floor for shares.
That said, do I think that META will soon hit $350, $400, or even $500 per share? Hitting these loftier prices levels is attainable, yet not in the immediate term. It’s going to take time for a rebound in digital ad demand, plus success with the company’s various growth efforts, to create the level of earnings needed for the stock to level up once again.
Still, unless evidence emerges that Meta will soon cease to be firing on all cylinders, this remains a high-quality stock at a reasonable price.
Bottom Line: Stick With a Winner
Meta Platforms is not unsinkable by any means. Any sort of stumble with its AI/metaverse efforts could have a dramatic impact on META’s future stock price performance.
The digital ad market comeback is off to a good start, but what seems like the start of a rapid rebound could turn into more of a sluggish recovery.
Having said that, don’t dwell on the possibility of the Meta Platforms story taking a turn for the worse. Instead, focus on the stock’s still strong chances of remaining a winner.
The latest numbers underscore that the company is crushing it on execution, and management is making the right moves today to maintain its winner status.
Still one of the best “buy and hold” plays out there. Buy META stock if you do not own it, hold onto it if you currently do.
META stock earns a B rating in Portfolio Grader.
— Louis Navellier and the Investor Place Research Staff
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Source: Investor Place