Is it the right time to consider buying, selling, or holding Meta (META) after its Q4 earnings? Since October 2024, Meta has seen a slight decrease of 2.8%, with its stock price hovering around $566.59.
Is this dip an opportunity to buy META, or does it reflect underlying issues with the company's performance and quality? To delve into this further, read our comprehensive analysis report for free.
What Makes META Appealing?
Founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) runs major social networks globally, including Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse-focused Reality Labs.
1. Strong Growth in Customer Spending
Tracking average revenue per user (ARPU) is crucial as it shows how much the company earns from advertising to its users, reflecting the value advertisers see in Meta’s audience and ad-targeting capabilities.
Meta has seen impressive ARPU growth, with an average of 11.7% over the past two years. Increased monetization alongside a growing daily active user base signifies the platform's value, with users spending significantly more compared to previous years.
2. Efficient EBITDA Margin
Monitoring operating income helps understand a business's core profitability. EBITDA, a common metric for consumer internet companies, removes one-time expenses to offer a normalized view of profit potential.
Meta has showcased strong profitability, boasting an average EBITDA margin of 59.7% over two years, supported by a high gross margin that provides a solid foundation.
3. Strong Free Cash Flow Margin
While free cash flow is not always highlighted, it reflects overall operating and capital expenses, making it harder to manipulate and essential for assessing financial health.
Meta has demonstrated strong cash profitability due to its business model and cost-effective customer acquisition strategy, leading to a robust free cash flow margin averaging 31.8% over the past two years.
Conclusion
While Meta appears as a high-quality business, the current share price at $566.59 per share (or 13.2× forward EV-to-EBITDA) raises questions about the right time to make a move. To explore further insights, check out our in-depth research report for free.