Over the past six months, Meta’s shares (currently trading at $591.67) have posted a disappointing 11.8% loss, well below the S&P 500’s 11% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Given the weaker price action, is this a buying opportunity for META? Find out in our full research report, it’s free.
Why Are We Positive on Meta?
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ: META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
1. Eye-Popping Growth in Customer Spending
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Meta’s audience and its ad-targeting capabilities.
Meta’s ARPU growth has been exceptional over the last two years, averaging 24.4%. Although its daily active people were flat during this time, the company’s ability to successfully increase monetization demonstrates its platform’s value for existing users. 
2. EBITDA Margin Reveals a Well-Run Organization
Operating income is often evaluated to assess a company’s underlying profitability. In a similar vein, EBITDA is used to analyze consumer internet companies because it excludes various one-time or non-cash expenses (depreciation), providing a clearer view of the business’s profit potential.
Meta has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 61.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Meta’s EPS grew at 51.1% compounded annual growth rate over the last three years, higher than its 23.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why Meta ranks near the top of our list. After the recent drawdown, the stock trades at 9.6× forward EV/EBITDA (or $591.67 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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