The Zacks Internet – Software Industry has fallen sharply this year, shedding value by almost 50%. However, over the past month, the sector has returned 7.8%. This is somewhat more than the S&P 500’s 5.5% and suggests that investors are starting to buy again.
On July 27, after the market closes, Meta Platforms (NASDAQ:META), a significant player in the sector, is scheduled to announce its quarterly results. The largest social media platform in the world, Meta Platforms has expanded its portfolio from its Facebook app to include services like Instagram and WhatsApp.
META is a favourite among investors. Therefore, investors will closely scrutinize the quarterly report. It will give them a more accurate picture of what has been happening in the background against a harsh macroeconomic environment.
Meta’s Performance & Valuation of Shares
For Meta Platforms, 2022 has not been a happy year, with its shares losing more than half of their value and significantly underperforming the S&P 500.
When we look at the share performance over the past year, we can see that META shares have been in a severe downturn for a while, with shares breaking off in the wake of the company’s weaker-than-expected earnings announcement in February.
However, the company has appealing valuation criteria, as seen by its Style Score of a B for Value. The forward earnings multiple for META has decreased to 15.1X. This is well below the highs of 37.1X in 2020 and the median of 24.1X during the last five years.
In addition, compared to the S&P 500, the value implies a 15% discount.
Quarterly Projections
With three negative estimate adjustments hitting the tape during the past 60 days, analysts have downgraded their expectations for the forthcoming quarterly report. The $2.51 Zacks Consensus EPS Estimate for the quarter also considers a troubling 30% year-over-year decline in quarterly earnings.
The company’s top line appears to be staying the same; the $28.8 billion projection for quarterly revenue plugs in a slight 0.9% decline in revenue year over year.
Performance & Market Responses for the Quarter
Recently, Meta Platforms has experienced success with its bottom line, outperforming the Zacks Consensus EPS Estimate in five of the company’s past six quarters. In addition, the business’s most recent report showed a solid bottom-line increase of 7%.
In most cases, top-line results have exceeded forecasts as well; during the last six earnings reports, Meta Platforms has achieved four top-line beats.
Be prepared for META shares to be highly volatile after the quarterly release; in its most recent report, shares increased 14% but fell 25% after the quarterly report in February.
To Sum Up
With shares losing more than half of their value, Meta Platforms had a fall from grace in 2022. It’s one of the more significant valuation reductions we’ve seen, and it underscores the complex business environment the company has had.
Revenue is anticipated to stay flat while earnings are predicted to fall significantly. After the sell-off, however, the company has much more realistic value measures.
Featured Image: Megapixl © Michaelvi
