After struggling through a difficult year in 2022, Meta Platforms Inc. (ticker: META) shares are once again on the rise in 2023. The stock is already up 125.3% this year through June 6, outpacing the S&P 500’s 11.6% gain over the same period.
Meta went public back in 2012 under the name Facebook, and its initial public offering was one of the most highly anticipated and controversial IPOs in history. After a rocky start to life on the public market, Facebook stock eventually found its stride and has become one of the largest and most profitable online advertising companies in the world in 2023.
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Meta is now heavily investing in its future, developing virtual reality and artificial intelligence technology and building infrastructure for the metaverse. The stock hasn’t made a new all-time high since August 2021, but investors hope the company’s heavy investments in next-generation technology and its massive global user base are the perfect recipe for another decade of outperformance ahead.
Meta’s 11-Year Journey
Facebook was founded as one of the earliest social media platforms in 2004 by Harvard University student Mark Zuckerberg, but the company has made several pivots and key acquisitions throughout its history. The company went public at a valuation of $104 billion in 2012.
“The facebook” was originally open only to Zuckerberg’s fellow Harvard students, but it quickly expanded to other local colleges in the Boston area and then to all U.S. universities. In 2005, high schoolers could sign up for Facebook, and the site ultimately extended membership to anyone with an email address in 2006.
To increase engagement, Facebook launched the “like” button in 2009. By July 2010, Facebook’s user base had grown to over 500 million people.
“(Meta) is also applying artificial intelligence and virtual and augmented reality technologies to various products, which may increase Meta user engagement even further.” – Morningstar analyst Ali Mogharabi
In April 2012, Facebook made a game-changing acquisition, buying social media platform Instagram for roughly $1 billion in cash. Today, Instagram has more than 2 billion monthly active users, more than 50% of which are between the ages of 18 and 34 years old.
Facebook priced its IPO shares at $38 on May 18, 2012, and the Facebook IPO was one of the most publicized events of the decade on Wall Street. Unfortunately, the stock tanked in its first few weeks of trading. By August 2012, Facebook’s market cap had dropped by $50 billion, and its share price dropped as low as $17.55.
By 2013, Facebook shares had recovered to their IPO price once again, propelled higher by impressive advertising revenue growth.
Facebook’s rally continued over the next several years, and the company expanded its business along the way. It acquired mobile messaging company WhatsApp for $19 billion in February 2014 and VR technology company Oculus VR for $2 billion just a month later.
In October 2021, Zuckerberg announced Facebook would be rebranding with Meta Platforms as its parent company and pivoting its focus to building the metaverse, an immersive online world in which people interact virtually. As part of the rebranding, the stock would also change its ticker from FB to META.
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The Numbers on Meta Stock
Meta’s evolution and innovation have helped the company grow its revenue by more than 2,000% from 2012 through the end of last year. In 2022, Meta reported $116.6 billion in revenue, down 1.1% year over year.
Unfortunately, slowing revenue growth, costly metaverse investments and broad tech sector weakness sent Meta’s stock down 64.2% in 2022, its worst calendar year since its IPO.
Still, from its IPO through market close on June 6, Meta shares have generated a return of 609.2% compared to a 230.7% total return for the S&P 500 during that stretch. Those gains translate to a roughly 19.5% compound annual growth rate for Meta compared to an 11.5% CAGR for the S&P 500 in that time.
As a result, $10,000 in META stock purchased during Facebook’s IPO 11 years ago would now be worth about $71,000.
Analyst Outlook
Even after those impressive long-term returns, Wall Street analysts remain bullish on Meta’s outlook. Among the 59 analysts covering the stock, Meta has 46 “buy” or “outperform” analyst ratings compared to just four “underperform” or “sell” ratings, according to CNN. The average analyst price target for META stock is $280, suggesting 3.3% upside over the next 12 months from its June 6 closing price.
CFRA Research analyst Angelo Zino said in a research note that Meta has an attractive valuation and several major growth opportunities, including AI, the metaverse and Reels, which is a competitor to TikTok’s short-format videos.
“We think recent dollar weakness, as well as favorable comparisons, creates a healthy setup for META while a greater focus on cost cuts improves the longer-term margin/FCF profile,” Zino said, referring to the company’s free cash flow.
He projects revenue growth will accelerate from 5.5% in 2023 to 10% in 2024.
Morningstar analyst Ali Mogharabi said Meta’s Reels impressions and ad prices are improving and should drive margin expansion starting in 2024.
“It is also applying artificial intelligence and virtual and augmented reality technologies to various products, which may increase Meta user engagement even further, helping to further generate attractive revenue growth from advertisers in the future,” Mogharabi said.
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How Much Would $10,000 Invested in Meta Stock at Its IPO Be Worth Today? originally appeared on usnews.com
