How to Buy Facebook / Meta Stock in Nigeria

Pros and Cons of Buying Meta Shares

👉 Meta (FB), formerly Facebook, has experienced ups and downs in recent years, as has its stock price. It has remained a high-profile company that consistently captures the public’s imagination since its initial public offering in May 2012.

👉 Meta is one of the largest companies in the United States and is widely held by both retail and institutional investors. As Facebook, it was included in the popular FAANG acronym with Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG) unit Google. For years following the IPO, its shares experienced an exceptionally strong and relatively smooth rise, but this has been punctuated by shareholder concern over data privacy scandals and anti-trust investigations.

👉 Meta shares overcame those issues, reaching all-time highs in August 2021, only to plummet 25% on Feb. 3, 2023, after the company released quarterly results and a revenue outlook that fell short of analysts’ expectations.

👉 Meta Platforms has undergone an “about face” in recent months. From Apple’s data privacy changes to fierce competition, the company is facing headwinds.

👉 On top of that, the company is heavily investing in the metaverse, which will reduce earnings by $10 billion in 2021.

👉 The stock remains as a strong buy.

Pros of buying Meta shares in 2023

👉 Meta Platforms (NASDAQ: FB) has seen stock sentiment shift from a growth stock to a legitimate value stock in a matter of months. Due to its strong free cash flows, the stock has typically avoided tech-like volatility, but the recent earnings report sent the stock plummeting, wiping out nearly three years of gains.

👉 The stock is now trading at a trailing earnings multiple of 16 times, which is typical for companies with no growth. I anticipate that growth will resume and that the stock price will react dramatically. As one of my higher conviction ideas in today’s market, I rate shares as a strong buy.

👉 After peaking at $384 per share in late 2021, Facebook has dropped more than 40% to trade around $230 per share.

👉 While sentiment toward the stock remains negative, it is critical not to let the stock price action influence the fundamental evaluation. FB remains one of the most appealing advertising platforms in the world, having consistently increased its average revenue per user even as ARPU exceeds $50 per quarter.

👉 However, at these prices, the fundamental thesis may be even more rudimentary. FB is currently trading at about 16 times trailing earnings. In 2021, the company will have converted 97 percent of its net income into free cash flow and will have $48 billion in net cash on its balance sheet. In 2021, the company repurchased $44.8 billion of stock, exceeding the $38 billion in free cash flow.

👉 That shift in capital allocation policies appears to have gone unnoticed by Wall Street, as Facebook, and much of the rest of the tech industry, has historically avoided aggressive share repurchases in favour of hoarding cash. Given that the stock price is significantly lower, I believe FB should maintain a similar capital allocation policy in the future.

👉 The company could theoretically buy back around 7% of outstanding shares each year using only free cash flow, providing an appealing shareholder yield while investors wait for growth to return.

👉 Some investors may consider potential ROI from metaverse investments to be a “pro” of purchasing the stock, but in my opinion, it is still too early to tell if the metaverse will pay off for the company.

Cons of buying Meta shares in 2023

👉 That brings us to the disadvantages of investing in Facebook. I’ve already discussed the company’s data privacy and competition concerns. Aside from that, Facebook is heavily investing in the metaverse. We can see in the table below that “reality labs,” the segment that includes metaverse investments, cost the company $3.3 billion in operating losses in the fourth quarter.

👉 I previously stated that the company is trading at 16 times earnings. To give you an idea of how much the company is investing in the metaverse, if we exclude metaverse losses, the company would have earned $10 billion more in operating income and the stock would be trading at only 13x earnings.

👉 If the metaverse investments fail to pay off, investors will have effectively subsidised what will be remembered as a costly side project for CEO Zuckerberg. That $10 billion (and growing) in investment spending could have been better spent on increasing investment in their core businesses or simply buying back more stock.