Just say Meta (META), formerly Facebook, has had its ups and downs over the past few years, as has its stock price. Since its initial public offering in May 2012, it has remained a high-profile company that consistently captures the public’s imagination.
Meta, one of the largest US companies, is widely held by both retail and institutional investors. Like Facebook, it was ranked among other technological heavyweights in popularity FAANG shortcut next to Amazon (AMZN)Apple (AAPL), Netflix (NFLX) and Alphabet (GOOG) Google drive. Its stock enjoyed exceptionally strong and relatively smooth growth for years after its IPO, but that was interrupted by shareholder concerns over privacy scandals and antitrust investigations. Meta’s stock beat those issues and hit all-time highs in August 2021, but fell 25% on February 3, 2022, after the company provided quarterly results and a revenue outlook that fell short of analysts’ estimates.
- Meta (formerly Facebook) has grown to become one of the largest and best-known technology companies in the world.
- Since its IPO in 2012, the company’s stock has rallied and, despite some bumps along the way, hit all-time highs in the summer of 2021 before falling 25% on February 3, 2022, after Meta released its quarterly results and revenue outlook. below the average of analysts’ estimates.
- Stocks continued to fall throughout 2022, hitting lows not seen since 2015.
- Before you decide to buy a stock, be sure to research the fundamentals of the company’s business and consider market trends.
2018-2022: Some very bad years
Of course, the social media giant hasn’t shied away from problems, and they came to a head in 2018. Issues of serious concern have been brewing for years over Facebook’s (now Meta) handling of user privacy and fake news, the company’s implicit role in allowing criminals and terrorists to use the site, and user data breaches massive dimensions.
Facebook has faced the most backlash for inadvertently helping the now-defunct British political consultancy Cambridge Analytica mine data and use millions of user profiles that were apparently misused to target political ads during the US presidential election season and during Britain’s Brexit. referendum campaign.
Partly as a result of this personal data scandal, Facebook issued lower guidance for ad revenue in its July 2018 earnings report, sending the company’s stock down as much as 22% on the day. This marked the stock’s biggest intraday decline until February 3, 2022, when the stock fell as much as 27% from its morning lows. The 2018 decline actually marked the largest single-share loss in market value in US stock market history, at around $119 billion, until the fall on February 3, 2022, was initially estimated to have depleted $230 billion in market value.
During 2022, META stuck around and continued to struggle, hitting lows not seen since 2015. This was driven by a broader selloff in tech stocks, plus heavy fines and negative regulatory rulings from EU regulators who claimed the company broke the law by that it forced the user. to receiving targeted ads and violating their privacy. In fact, META stock is down more than 60% for 2022, making it the worst performance ever.
How to analyze Meta
Buyers at the lows on a stock’s worst days are likely aware of the issues driving the decline and are counting on getting a bargain amid bearish sentiment. Some come to this judgment only after careful analysis of the company’s prospects.
This guide should give novice investors a better idea of how to navigate the potential pitfalls and what to look for when considering investing in Meta (META) and similar shares. Getting into the stock market can be scary, but every seasoned investor was once a beginner.
Before buying any stock, investors should do due diligence to ensure that the company and the stock have the potential to perform well. Due diligence can include various forms of analysis, the most basic being fundamental analysis and technical analysis.
- In fundamental analysis, an investor evaluates the intrinsic value of a stock in light of the overall economy and industry conditions, as well as the company’s finances and management.
- Technical analysis uses statistics that include past prices and volume of a stock. Instead of looking at a company’s intrinsic value, technical analysis focuses on identifying patterns and trends in current and future stock price movements.
Basically, investors should examine the financial management of the company. These can be found in its most recent SEC filings. The company website should have an investor relations page. Financial sites like our own Investopedia also offer exceptionally useful company-specific information.
Conducting due diligence
In order to buy Meta stock, an investor should analyze advertising revenue growth, including mobile device growth, usage trends, risks to operations and outlook and guidance.
Also look at trends for profit margins, total sales and monthly active users (MAU). Are these numbers going up, down or sideways?
After he did something due care An investor should decide if the current price is a suitable entry point and feel comfortable with the decision to buy the stock.
Fundamental analysts calculate valuation metrics to determine whether a stock is undervalued (when the entry price is most attractive) or overvalued (investors may want to wait until the price falls before buying the stock). The price-earnings ratio (P/E Ratio) is a common valuation metric, but there are many others. The P/E ratio for Meta was 12.4 as of January 2023. On its own, it doesn’t tell the investor much. However, when compared to historical or industry P/E ratios, it can help determine how a stock is valued relative to its past and competitors.
Another way to determine if a stock price is at a good entry point is to look at the historical trends of the stock chart. Technical analysis attempts to use price and volume data to analyze trends in supply and demand and find favorable entry points based on common trading patterns.
If you decide, it’s a purchase
Once an investor has determined that a stock is a good value at the current price, the next step is to calculate the number of shares to buy. Most online brokers have a stock calculator attached to the stock buying process. Otherwise the calculation is:
Total amount required to invest / price per share = number of shares to buy
The current price per share for Meta was around $130.00 on January 8, 2023. This stock price Market capitalization in the amount of approximately 340 billion dollars.
For Meta, if the total purchase amount is $10,000 at a price per share of $130, the investor can purchase:
$10,000 / $130 = 76.9 shares
How has Meta’s share price performed over the past few years?
Since its IPO in 2013, META stock has risen sharply, hitting an all-time high of nearly $380 (split-adjusted) in the fall of 2021 after a rocky 2018. However, in 2022, the company’s shares fell more than 60%, to a level not seen since 2015.
What factors have contributed to META’s share price fluctuations?
META stock is driven by both company-specific and technology industry forces. In 2022, the tech sector tanked, but even META saw its shares fall more than the tech-heavy NASDAQ 100. Meta faced several privacy concerns, including the Cambridge Analytica scandal in 2018, which sent the company’s stock price plummeting, and a decision by EU regulators in early 2023 that fined the company hundreds of millions of euros for online privacy violations. laws. Meta also faced antitrust investigations, adding to investor concerns about the company.
How can I research the fundamentals of a company’s business before I decide to buy shares?
There are several ways to research the fundamentals of a company’s business before you decide to buy its stock:
- View the company’s financial statements: You can view a company’s income statement, balance sheet and cash flow statement to get an idea of its financial performance and position. This will help you understand how the company generates and uses its resources and whether it is financially sound.
- Analyze the financial indicators of the company: Financial ratios such as the price/earnings ratio (P/E ratio) and the debt-to-equity ratio can help you evaluate a company’s financial performance and risk profile.
- Read the company’s news and press releases: Keep up to date with the latest news and developments at the company by reading its press releases and newspaper articles. This can help you understand the company’s strategy, growth plans and any challenges it faces.
- Research the industry: Understanding the industry the company operates in can help you gauge the company’s competitive position and potential for future growth.
- Consult a broker or financial advisor: If you are unsure whether to invest in a particular stock, it may be helpful to consult an advisor or other financial professional who can provide further advice and help you make an informed decision.
Deciding to invest in Meta or any stock requires research and analysis. Investors should consider the potential risks and rewards before making any investment.