As Meta Platforms, previously known as Facebook, left the trillion-dollar company club due to challenges from Apple’s privacy changes and stiff competition from TikTok, doubts of its capability to regain its elite status lingered. However, the company has surged back into the trillion-dollar territory by reclaiming its revenue growth and embracing an aggressive approach within its various segments. Could its remarkable resurgence now be setting the stage for Meta Platforms to achieve a $2 trillion valuation by 2025?
Meta Platforms CEO Mark Zuckerberg. Image source: Meta Platforms.
The Rejuvenation
After facing challenges that curbed its advertising business growth, Meta Platforms saw its revenue decline in 2022, leading to a decrease in its operating margin and earnings per share. Amidst this decline, doubts grew, causing its stock to plummet to a seven-year low and reducing its market cap significantly.
However, in 2023, a remarkable Rejuvenation occurred with revenue and EPS experiencing a significant increase. Driven by a combination of factors including an aggressive strategy aimed at countering market challenges and expanding user base, Meta Platforms saw significant gains in its revenue and operating margin, reigniting investor interest and support.
Notably, Chinese ad buyers became a significant revenue contributor for Meta Platforms, and the company’s strategic changes in its advertising algorithms and platform expansions paid off handsomely. The company initiated several cost-cutting measures, greatly improving its free cash flow and enabling it to introduce a lucrative buyback program and a quarterly dividend — luring back investors and fueling its stock price rally.
The Road to $2 Trillion
Looking ahead, analysts anticipate a compound annual revenue growth rate of 13% and an EPS CAGR of 22% from 2023 to 2026, aligning Meta Platforms’ stock valuation at a reasonable 24 times forward earnings. The solid fundamentals lay a practical pathway for its stock price to potentially reach $650 per share and a market cap of $1.65 trillion by 2025.
|
Metric |
2024 |
2025 |
2026 |
|---|---|---|---|
|
Estimated revenue growth |
17% |
11% |
12% |
|
Estimated EPS growth |
32% |
14% |
19% |
Analysts’ estimates. Data source: Marketscreener.
If Meta Platforms maintains its growth trajectory and valuation, it is conceivable that its stock could surpass $2 trillion by the end of 2025. Although long-term predictions should always be approached cautiously, Meta Platforms’ path to a $2 trillion valuation appears viable as it fortifies its advertising business and ventures into promising territories like the metaverse, positioning itself for substantial diversification of its revenue streams.
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