Is it too late to buy Metaplatform stock?

meta platform (meta 20.32%) The company’s stock appears to be back in Wall Street’s favor, as it recently surpassed its all-time high set in mid-2021. Investors flocked to the stock again following the release of the company’s fourth quarter and full year 2023 reports. The introduction of a dividend also seems to have improved sentiment surrounding the stock.

On the other hand, rising prices (up 212% over the past year) are making Meta stock increasingly expensive, and investors may lose interest in the dividend after looking at its yield.

While such factors are unlikely to hinder Meta’s long-term growth, they may not result in revenues exceeding all-time highs. S&P500 — at least in the short term. Here’s why:

Meta’s performance in 2023 was impressive

The social media giant’s latest results show why many analysts characterize Metaplatform as a “Magnificent Seven” stock. Meta has managed to bounce back from its Metaverse-related missteps and is up over 300% from its October 2022 lows. This pushed the market capitalization above $1 trillion, a feat achieved by most tech stocks.

Mehta rules social media, owning Facebook, Instagram, Threads, and WhatsApp. Approximately 3.2 billion people use at least one app every day, a number no other social media company can match.

For the full year 2023, Meta reported revenue of $135 billion, an increase of 16% from the year-ago results. At the same time, expenses increased by just 1%. As a result, net income amounted to just over $39 billion, an improvement of 69% year-on-year.

As already mentioned, meta investors will receive dividends. The first quarterly dividend is $0.50 per share ($2 per year) and is scheduled to be paid on March 26th. Given his 2.57 billion shares outstanding, Mehta’s dividend cost would be just under $5.2 billion annually. Fortunately, the company generated $43 billion in free cash flow in 2023, an amount that easily covers its payment costs.

Meta is now at a premium price

Unfortunately, income-oriented investors are likely to lose enthusiasm for the stock’s dividend when they discover that its yield is just over 0.4%, well below the average of 1.4%. S&P500. At these levels, investors may treat dividends as an afterthought rather than a reason to own a stock. In Mehta’s defense, part of the reason the dividend yield is so low is that the stock price has risen significantly in a short period of time.

After 15 months of share price growth, the stock looks pretty frothy. At a price-to-earnings ratio of more than 35 times, the earnings multiple is nearing its highest level in five years, a dramatic turnaround from when it hit single digits in the fall of 2022.

Additionally, Meta management offered a mixed outlook at best. The company expects sales in the first quarter of 2024 to be between $34.5 billion and $37 billion. This represents a healthy revenue growth rate of 25% at the midpoint. However, the company declined to release its full-year 2024 revenue outlook, instead telling investors that 2024 expenses will rise due to higher infrastructure costs, personnel costs, and higher operating losses at its Metaverse division, Reality Labs. revealed. With such increased expenses, it is unlikely that profits in 2024 will increase as much as they did in 2023, if at all.

We like Meta Platforms stock.

Meta announced strong results, showing that it has moved on from its previous failures into the Metaverse. The company is a leading social media company and has strong free cash flow, so its stock price should rise over the long term.

However, new investors may want to wait for a more opportune time to buy. Also, income investors can look at the dividend yield and be underwhelmed by the dividend. Additionally, increased spending and uncertainty about his 2024 earnings indicate uncertainty. Meta’s P/E ratio is near a five-year high, so it may be worth waiting for valuations to fall before buying this stock.