Except for Elon Musk, Meta Platforms (NASDAQ:META) CEO Mark Zuckerberg has gained the most wealth in 2023, up $72.7 billion through Dec. 7. Most is from the 162% gain in META stock. Thanks to 2023’s massive gains, Zuckerberg has returned to the Bloomberg Billionaires Index top 10. He sold META stock recently, worth $185 billion according to Bloomberg.
People sell for various reasons, but they buy for just one (shares are undervalued). Don’t read too much into Zuckerberg’s first share sale in 24 months. The stability of Meta’s business in 2023 resulted in a higher share price. The question is whether it can maintain the momentum in 2024. Investors should consider these factors to predict market performance in 2024.
How Analysts View META Stock
Meta delivered three consecutive quarters with positive earnings surprises. In Q3, its earnings per share were $4.39, 21% higher than the analyst estimate. For Q4, the consensus is $4.90, 178% higher than in Q4 2022. Analysts are projecting 2023 earnings of $14.36 (67% higher year-over-year) and 2024 of $17.39 (21% higher).
Of the 61 analysts covering META, 51 rated it “Overweight” or an outright “Buy,” with a target price of $382, 17% higher than where it’s currently trading.
Analysts particularly like what the company is doing with Amazon to expand its ad revenues and shopping capabilities. Facebook and Instagram users will connect their accounts to their Amazon accounts.
“‘Improved ad quality — better targeting, more product information, delivery times, etc. — and removing payment friction should lead to higher conversion for AMZN’s ads on META,’ wrote a team of Morgan Stanley analysts led by Brian Nowak. ‘As such, we expect these ads to lead to faster META ad revenue growth and faster transaction growth for AMZN,’” Investor’s Business Daily reported in November.
Anything the company can do to keep ad revenues growing is vital to its higher share price. I would continue to watch what initiatives Meta takes to broaden its ad volumes and shopping capabilities.
After all, it’s really an ad business, not a social media platform.
The Key Metrics are Moving in the Right Direction
Like all social media platforms, some key metrics are standard to all of them. Every firm uses slightly different wording, but they get to the heart of the matter: how engaged are the users?
In Q3 2023, across Meta’s entire family of products (Facebook, Instagram, Messenger, and WhatsApp), it had 3.14 billion daily active people (DAP) and 3.96 billion monthly active people (MAP), both up 7% over Q3 2022.
Amazingly, Meta’s MAP is nearly half the global population. It boggles the mind.
The other important metric is ad impressions and price per ad. In the third quarter, ad impressions were up 31% over last year. Not surprisingly, given the weakened ad market earlier in the year, the price per ad fell by 6% YOY.
However, Fitch Ratings recently said that ad spending is expected to improve in 2024, suggesting that Meta’s ad revenues next year should move higher from 2023. That’s good news for META stock.
“Fitch expects the drag on credit profiles from the advertising recession, streaming platform losses and prior M&A activity to lighten during 2024,” said Senior Director Jack Kranefuss.
The metrics are sound and moving in the right direction in 2024. I’d watch these metrics closely in the first two quarters of 2024.
Can META Stock Keep Moving Higher in 2024?
From what I can tell, all the telltale signs of a Meta ad revenue recovery have come to light in the second half of 2023. We’ll know more when Meta reports its fourth-quarter results in early February, but it’s looking good.
As for its valuation, its key financial ratios are a mixed bag of overvalued and fairly-valued. For example, its trailing 12-month free cash flow is $37.6 billion.
Based on an enterprise value of $814.4 billion, it has a free cash flow yield of 4.6%. Anything between 4% and 8% is fair value. However, its current earnings yield is 3.49%, 96 basis points less than its five-year average. That suggests its share price could be a tad overvalued.
Investing in META stock depends on whether you believe the next 2-3 years will benefit its social media platforms. Given what’s happening to X (Elon Musk is doing most of the damage to his brand), it can’t hurt to be patient about buying stock in Meta.
Can Meta Platforms stock keep moving higher in 2024? Sure, it can, even with a recession baked in.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
