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Since the start of November 2023, Meta Platforms (META) CEO Mark Zuckerberg has sold over $228 million worth of company shares. The activity has drawn headline coverage in the financial media - but should Zuckerberg's recent unloading of META stock be a point of concern for long-term shareholders?
Generally, if company insiders are buying shares, it suggests they feel the stock is undervalued and are bullish on the long-term prospects of the company. So, naturally, when a high-profile member of the management team reduces their position, investors might be worried - especially in light of META stock's outsized return of 166% YTD. So, does Zuckerberg think the social media giant is overvalued at current prices?
Not necessarily. It’s actually much less straightforward to evaluate the sentiment when it comes to insider selling, especially with ultra-high-net-worth individuals. For instance, billionaires often make significant stock donations or sales at this time of year, whether for philanthropic or simple accounting reasons.
In recent months, Zuckerberg's fellow tech billionaires - including Amazon (AMZN) founder Jeff Bezos, Nvidia (NVDA) CEO Jen Huang, and Salesforce (CRM) boss Marc Benioff - have all sold or donated millions via stock sales.
Notably, this marks the first stock sale for Zuckerberg since 2021, after a brutal performance for tech stocks in 2022 - and most of the CEO's stake in META is held through preferred voting shares, which are non-public. So, it's important to consider the bigger picture.
Is Meta Platforms Stock a Good Buy Right Now?
Meta is the largest social media company in the world, and owns platforms such as Facebook, Instagram, Facebook Messenger and WhatsApp. These four applications cumulatively attracted close to 4 billion monthly active users in Q3 of 2023. Meta also launched the Threads app in July to rival Twitter, and attracted 100 million users within the first five days.
Its portfolio of social media apps allowed Meta to generate $127 billion in sales in the last four quarters, up from $116.6 billion in 2022. Additionally, its high-margin ad business allows Meta to invest heavily in research and development and several other growth projects.
The company’s augmented and virtual reality business, called Reality Labs, is expected to be a major driver of sales in the upcoming decade, particularly if Zuckerberg is successful in building the metaverse. Reality Labs has lost $11.5 billion in the last three quarters, compared to losses of $9.5 billion in the year-ago period. However, Meta Platforms still reported operating cash flows of $51.7 billion in the first nine months of 2023 and ended Q3 with $61 billion in cash.
Is META Stock Undervalued?
Analysts tracking META stock expect sales to rise by 14.5% to $133.56 billion in 2023 and by 13% to $151 billion in 2024. Comparatively, adjusted earnings per share is forecast to expand from $8.59 per share in 2022 to $17.39 per share in 2024. Priced at 18.8x forward earnings, META is still cheap, given its stellar growth estimates.
Wall Street expects META’s EPS to improve to $35 per share by 2027. If it is still valued at 19x forward earnings, the tech stock should rise to $665 in the next three years, indicating an upside potential of over 100%.
Out of the 38 analysts covering META, 36 recommend “strong buy,” one recommends “moderate buy,” and one recommends “moderate sell.” The average target price for META is $382.64, which is about 15% above current prices.
