Valuentum Exclusive Analysis for the Discerning Investor

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Image Shown: Shares of best idea Meta Platforms Inc surged higher by ~18% in afterhours trading on April 27 after its first quarter 2022 earnings report indicated that investor fears over its core business were overblown as its daily active user base posted solid growth in March 2022. 

The company behind Facebook, Instagram, and WhatsApp, Meta Platforms reported first quarter 2022 earnings on April 27 that missed consensus top-line estimates but smashed past consensus bottom-line estimates. Shares of FB surged higher in the wake of its latest earnings report as the company’s family daily active people (‘DAP’) stood at 2.87 billion in March 2022, up 6% year-over-year, while its Facebook daily active users (‘DAU’) stood at 1.96 billion in March 2022, up 4% year-over-year. Rising competition from relative newcomers like TikTok in the social media space is not chipping away at Meta Platforms’ core business as investors had expected. The launch of Facebook Reels, which is similar to TikTok, has proven to be quite popular. We include Meta Platforms as a top-weighted idea in the Best Ideas Newsletter portfolio and continue to be enormous fans of Meta Platforms. Shares of FB have tanked in recent months, though we have stuck with our thesis through thick and thin. Meta Platforms may finally regain its upward momentum in the wake of its stellar first quarter earnings update. The selloff seen in shares of FB and US equity markets more broadly over the past several months is way overdone and driven more so by panic selling than anything else, in our view. Our fair value estimate, under what we deem reasonable valuation assumptions, stands at $367 per share of FB, which is well above where Meta Platforms’ stock is trading at as of this writing.