4. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders (Q1): 200
Meta Platforms, Inc. (NASDAQ:META), formerly known as Facebook, Inc. is a California-based technology conglomerate. The company’s Meta AI is working towards developing artificial intelligence in the digital world.
In the second quarter of 2022, Meta Platforms, Inc. (NASDAQ:META) generated $28.822 billion in revenue, with 98.43% of its revenue coming from the Family of Apps segment. The company had a high EBIT margin of 33.41% and a profit margin of 80.47%. Furthermore, the company uses its shareholder equity effectively and has an RoE of 25.48%. Additionally, the 5-year CAGR for the company has been recorded at 29.20%. The trailing 12-month cash flow yield of Meta Platforms, Inc. (NASDAQ:META) generates approximately $40 billion of free cash flow annually on average.
On July 28, JMP Securities analyst Andrew Boone reiterated an Outperform rating on Meta Platforms, Inc. (NASDAQ:META)’s shares with a price target of $215, down from $240. Boone considers META to be a “must buy” for advertisers and believes that the risk/reward of the company is positive at the current levels.
Here’s what Polen Capital said about Meta Platforms, Inc. (NASDAQ:META) in its Q1 2022 investor letter:
“What Would You Pay for the World’s Largest Communication and Entertainment Platform? How Does 5x Earnings Sound?
Meta Platforms also had solid, if not slightly lower-than-expected revenue growth last quarter but guided to a significant slowdown in revenue growth for 1Q 2022. Meta called out TikTok, a competitor for people’s time and attention, seeming to imply it as one of the factors causing the growth slowdown. This appeared to stoke fears that the company’s user engagement and value proposition was eroding for its users and marketers and subsequently would lead to lower advertising revenue growth and market share loss.
We do not doubt that TikTok is taking time and attention away from many forms of digital media, core Facebook and Instagram included. That said, we believe TikTok has mostly expanded the pie. Meta’s user engagement has been stable, even on the very mature core Facebook app. Our research shows that most of the growth headwinds are more likely attributable to a combination of factors. These factors include a preference for short-form video while spending time on the platform (Facebook and Instagram Reels), which is not monetized effectively yet, a COVID-19 pull-forward impact like Netflix, and changes to Apple’s (AAPL) iOS operating system.
More specifically, the changes to iOS make it more difficult for Facebook and Instagram to measure certain types of ads accurately, at least for now. Meta has quantified that the Apple impact as roughly a $10 billion revenue headwind for fiscal 2022, or approximately 7% of total revenue. This is a bit larger than we would have expected, and it is taking longer than expected for Facebook to develop with their own measurement tools. But, excluding the Apple impact alone, Facebook would be growing close to what we would have expected in a more normal environment. Although it could take some time to alleviate, we believe the Apple impact will prove temporary, and we continue to monitor engagement trends on Facebook and Instagram from competitors like TikTok…” (Click here to see the full text)
