The legacy Facebook branding has been officially decommissioned as the company looks to the future with the metaverse in its sights. As such, the newly branded company is conveniently called Meta Platforms Inc. (FB), thus firmly placing the company's future in the metaverse space. Albeit its social media properties will still be vital to the company, Meta believes that its future will be in the metaverse. This rebranding comes at a pivotal time after a string of public relations debacles stretching over several years. The underlying stock has been beaten up over the past month, falling from $384 to $312 or 19% from its 52-week high. This double-digit decline places Meta in very inexpensive valuation territory relative to its technology peers, and it's one of the cheapest high-growth stocks. With a firm pivot towards future end markets via the metaverse along with its social media prowess, its valuation is very appealing at this juncture.
Figure 1 – Facebook’s rebranding and new Meta logo that reflects the company’s new direction into the metaverse
The Metaverse
Meta strives to be a leader in the nascent metaverse, the intersection of virtual reality, augmented reality, three-dimensional video environment, and an all-encompassing virtual environment. It's a combination of multiple elements of technology, including virtual reality, augmented reality, and video, where users "live" within a digital universe. Supporters of the metaverse envision its users working, playing, and staying connected with friends through everything from concerts and conferences to virtual trips around the world. Mark Zuckerberg estimates it could take five to ten years before the key features of the metaverse become mainstream. But aspects of the metaverse currently exist. Ultra-fast broadband speeds, virtual reality headsets, and persistent always-on online worlds are already up and running, even though they may not be accessible to all.
Meta has already made significant investments in virtual reality, including the 2014 acquisition of Oculus. Meta envisions a virtual world where digital avatars connect through work, travel, or entertainment using VR headsets. Zuckerberg has been optimistic on the metaverse, believing it will be the next evolution of the internet or could replace the internet as we know it. "The next platform and medium will be even more immersive and embodied internet where you're in the experience, not just looking at it, and we call this the metaverse," said Meta CEO Mark Zuckerberg.
Social Media Goliath
Meta will continue to demonstrate its ever-expanding and massive moat in the social media space. Meta's core social media platform (Facebook), combined with its other properties such as Instagram and WhatsApp, continues to grow while expanding margins and unlocking revenue verticals. Despite being faced with several public relations challenges over the past couple of years (i.e., Cambridge Analytica, coordinated boycotts, government inquiries into privacy, jumbled earnings calls, anti-competitive testimonies, and the recent internal release of sensitive information suggesting profits supersede safety), Meta has triumphed to all-time highs after each event. Meta had to contend with scaled back advertising spending amid the COVID-19 pandemic in conjunction with the public relations issues. Meta continues to grow across all business segments, with its user base continuing to expand slowly. Meta's moat is undeniable, and any meaningful sell-off like the recent public relations-induced weakness could provide an entry point for the long-term investor. The stock is off 19% from its all-time highs, and the stock is inexpensive relative to its technology cohort.
Valuations and Inexpensive Stock
Meta has over 3.2 billion monthly users across its platforms (Instagram, Messenger, and WhatsApp) that the company is actively engaging to expand margins and create additional revenue verticals. The company is inexpensive from a valuation standpoint, especially after the 19% sell-off from all-time highs. Facebook has a P/E ratio of 24 and a PEG ratio of 1.1 compared to Amazon (AMZN) with a P/E and PEG of 68 and 1.9, respectively, Google (GOOGL) with a P/E of 27, Microsoft (MSFT) with a P/E and PEG of 37 and 2.2, respectively and Apple (AAPL) with a P/E and PEG of 28 and 1.8, respectively. Its PE and PEG ratios being the lowest among all big technology names, indicating that its growth relative to value is the best-in-class.
Core Growth
Meta is now ~19% off its all-time highs with the cheapest price-to-earnings multiple when compared to its tech cohort. Facebook continues to post unparalleled growth for a company of its size while its platforms are still the go-to properties for advertisers and influencers. If the company continues its path forward on remediating the privacy issues while posting best-in-class revenue growth, the stock will likely continue to elevate higher. Combine this with its future pivot into the metaverse, which will open up new end markets.
Meta is attempting to put these issues behind the company by spending billions on initiatives to combat fake news, ensure data integrity, implement stringent guidelines on third-party data sharing and overall transparency within its platform. As its recent quarter suggests, increases in costs and expenses demonstrate that the company is serious about tackling these issues head-on and moving forward.
Conclusion
Exit Facebook and insert Meta. The newly branded company is placing the future firmly in the metaverse space. This rebranding comes at a pivotal time after a string of public relations debacles stretching over several years. Meta strives to be a leader in the nascent metaverse, the intersection of virtual reality, augmented reality, three-dimensional video environment, and an all-encompassing virtual environment. Meta possesses a very inexpensive valuation relative to its technology peers (Apple, Amazon, Google, and Microsoft) and is one of the cheapest high-growth stocks. With a firm pivot towards future end markets via the metaverse along with its social media prowess, its valuation is very appealing at this juncture.
In the backdrop of the company's pivot into its next frontier, Meta has over 3.2 billion monthly users across its platforms (Instagram, Messenger, and WhatsApp) that the company is actively engaging to expand margins and create additional revenue verticals. Meta continues to post unparalleled growth for a company of its size while its platforms are still the go-to properties for advertisers and influencers. The recent pullback may be a good opportunity for long-term investors, with its future growth clearly seated in the metaverse.
Disclosure: Stock Options Dad LLC is a Registered Investment Advising (RIA) firm specializing in options-based services and education. There are no business relationships with any companies mentioned in this article. This article reflects the opinions of the RIA. This article is not intended to be a recommendation to buy or sell any stock or ETF mentioned. The author encourages all investors to conduct their own research and due diligence prior to investing or taking any actions in options trading. Please feel free to comment and provide feedback; the author values all responses. The author is the founder and Managing Member of Stock Options Dad LLC – A Registered Investment Advising (RIA) firm www.stockoptionsdad.com defining risk, leveraging a minimal amount of capital and maximizing return on investment. For more engaging, short-duration options-based content, visit Stock Options Dad LLC’s YouTube channel. Please direct all inquires to in**@st*************.com. The author holds shares of AAPL, AMZN, DIA, GOOGL, JPM, MSFT, QQQ, SPY, and USO.
