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Is Facebook’s share price the best value among FAANG stocks?

Meta-owned [FB] Facebook’s share price has escaped relatively unscathed from the selloff that has greeted tech stocks at the start of 2022. Down 1.3% since the start of the year (as of Friday 14 January’s close), that’s a better performance than FAANG peers Alphabet [GOOGL] and Apple [AAPL].

And with Facebook’s share price trading at a discount compared to the rest of the market, 2022 could be the year the stock makes more friends among investors.

 

 

 

 

What’s happening with Facebook’s share price

Facebook’s share price gained over 23% in 2021, beating out Amazon [AMZN], Netflix [NFLX] and the wider Nasdaq, but off the pace of the Apple and Alphabet’s respective 37% and 65% gains over the same stretch.

However, since closing at  $382.18 on 7 September, Facebook’s share price has fallen almost 12%, to close Friday at $331.9. Over this stretch the social media giant was battered with negative press, including employee-turned-whistleblower Frances Haugen’s testimony that the company puts profit ahead of the health of its users and society.

 

Facebook forecast to grow faster than other FAANGs

Facebook-owner Meta is forecast to be the fastest growing FAANG stock in terms of revenue this year, according to data compiled from Yahoo Finance. Revenue growth is pegged at 19%, topping Amazon’s forecasted 17.7%, Alphabet’s 17%, Netflix’s 14.% and Apple’s 5%.

19%

Meta's 2022 expected revenue growth is the strongest of all FAANG stocks, per Yahoo Finance

 

The cost conscious tech trader could also be tempted by Meta. A forward price to earnings ratio of 22.17 combined with its current price makes it a cheaper option than other FAANG stocks - the next cheapest is Netflix, which closed Friday at $525.69, while Amazon trades for over $3242.

Instagram could help bolster revenues this year. USB’s Lloyd Walmsley thinks that an updated news feed for the platform could help pump up engagement. The analyst upped his price target from $425 to $440 - a 32.9% upside on Friday’s close.

“Drawing from a wider content base could unlock a meaningful lift in engagement, reminiscent of TikTok,” Whalmsley wrote in a research note.

 

Meta spends big on the metaverse

Meta still seems to be awaiting the windfall that is the metaverse development. Afterall, renaming your company over the concept is a big act of faith. But if Facebook can convince even a fraction of its user base, then it's a gamble that could pay off. Of course, this comes with a cost.

Last year Meta spent $10bn on Facebook Reality Labs, which is responsible for developing the technology to make its metaverse possible, including hardware, headsets like Oculus Quest, and software. After third quarter earnings dropped, tech-publication The Verge noted that Facebook will now begin releasing earnings for its Reality Labs segment under a separate bucket from its other businesses.

$10billion

Total Meta spent on Facebook Reality labs in 2020

 

That makes Facebook’s next earnings report a must-watch for those interested in the metaverse, and a strong statement of just how seriously the company is taking the concept - as if changing its name wasn’t enough.

“We are committed to bringing this long-term vision to life and we expect to increase our investments for the next several years,” the company wrote in a press release accompanying third quarter earnings in October.

Jeremy Bowman writing on the Motley Fool highlights the headstart that Facebook has on other companies talking up the metaverse. In 2014, Facebook bought VR headset manufacturer Ocululus for a cool $2bn, and in 2021 had two-thirds of the headset market.

“If you're looking for exposure to the metaverse, buying the Facebook parent seems like a no-brainer. You get a giant, fast-growing, highly profitable advertising business trading at a bargain with the leading VR headset brand attached to it,” writes Jeremy Bowman.

Among the analysts tracking the stock, Facebook’s share price has an average $401.01 price target, according to Yahoo Finance - hitting this would see a 21.1% upside on Friday’s close.

Disclaimer Past performance is not a reliable indicator of future results.

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