Meta stock price forecast 20258/17/2023 Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for META's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Risks: For example, we've discovered 2 warning signs for Meta Platforms that you should be aware of before investing here. What is the reason for the share price sitting below the intrinsic value? For Meta Platforms, there are three essential aspects you should consider: For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. DCF models are not the be-all and end-all of investment valuation. Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. Good value based on P/E ratio and estimated fair value.Īnnual earnings are forecast to grow slower than the American market. SWOT Analysis for Meta PlatformsĪnnual revenue is forecast to grow faster than the American market. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Beta is a measure of a stock's volatility, compared to the market as a whole. In this calculation we've used 8.6%, which is based on a levered beta of 1.086. Given that we are looking at Meta Platforms as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 10-year free cash flow (FCF) forecast We do this to reflect that growth tends to slow more in the early years than it does in later years. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. To start off with, we need to estimate the next ten years of cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. See our latest analysis for Meta Platforms Crunching The Numbers For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Believe it or not, it's not too difficult to follow, as you'll see from our example! Our analysis will employ the Discounted Cash Flow (DCF) model. ( NASDAQ:META) by taking the expected future cash flows and discounting them to today's value. In this article we are going to estimate the intrinsic value of Meta Platforms, Inc. The US$265 analyst price target for META is 19% less than our estimate of fair value Meta Platforms is estimated to be 29% undervalued based on current share price of US$234 The projected fair value for Meta Platforms is US$328 based on 2 Stage Free Cash Flow to Equity
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