Facebook parent company Meta Platforms’ (Nasdaq: META) business has struggled over the last year, but the social media giant’s fourth-quarter 2022 earnings report contained results that were better than expected.
Overall revenue fell 4% year over year due to headwinds in the ad market, but that was a smaller drop than expected, and the company saw better-than-anticipated performance across some key engagement metrics. For example, daily active users (DAUs) for its Facebook platform rose 4%, hitting 2 billion; total average revenue per user across the company’s family of services (which include Instagram, WhatsApp and Messenger) came in at $10.86. DAUs across the company’s services rose 5% year over year to 2.96 billion, and monthly active users were up 4% to over 3.7 billion.
Despite recent layoffs, the company’s core platforms continue to look pretty strong, and management is showing it can effectively manage costs.
Meta Platforms’ share price was recently down over 20% from its 52-week high, and its stock seems attractively valued. (The Motley Fool owns shares of and has recommended Meta Platforms. Former Facebook executive Randi Zuckerberg, sister to Meta Platforms CEO Mark Zuckerberg, is on the Fool’s board of directors.)
Ask the Fool
From J.M., Canton, Ohio: I have a brokerage account, an emergency fund that can support me for a few months and no credit card debt. How should I deploy my extra dollars? Should I invest in real estate property, buy stocks or make extra payments on my 5% mortgage?
The Fool responds: It’s great that you don’t have credit card debt, as that would have to be your priority if you did.
Each of your choices can serve you well. Paying down your mortgage can be the least risky option. It would be like earning a guaranteed 5% return, since you won’t be paying interest on any principal you pay off.
Real estate investing can be profitable, but it isn’t as easy as you might think. You’ll need to read up on it first, and be willing to deal with the work and hassle that come with managing property.
While the stock market can be volatile, it has always risen over long periods, beating most other alternatives, such as gold, bonds — and even real estate. You can get in and out of stocks quickly, too, whereas getting in and out of real estate can take awhile. If you opt for stocks, consider a simple, broad-market index fund, such as one that tracks the S&P 500.
From S.B., Naples, Fla.: How should I go about investing in stocks priced below $10 per share?
The Fool responds: Shift your focus away from a stock’s price. Understand that a $4 stock can really be worth $1, while a $300 stock may be undervalued and on its way to a $1,000 value in a few years. Focus on finding healthy, growing, profitable companies trading for less than their shares are worth, and be patient.
The Fool’s School
There are many ways to invest in stocks, such as chasing high-flying stocks or pouring money into risky penny stocks. (Those are not great strategies.) One of the most effective approaches, practiced by superinvestor Warren Buffett and other respected investors, is value investing.
Many people assume a stock’s price reflects its true value, but it really just reflects the last price at which the stock traded. Value investors aren’t willing to pay too high a price even to invest in appealing stocks. If many people have been enthusiastically buying shares, the stock’s price may well have been bid up beyond what it’s really worth. But if many people have been selling shares, the stock may be undervalued — warranting a closer look by value investors, who always aim to buy at well below its “intrinsic value” (what the stock seems to be worth).
So what’s a stock’s intrinsic value? Well, it’s tricky to precisely calculate, and many savvy investors will disagree about a particular stock’s true value. You can get a rough idea of whether a stock is over- or undervalued by checking measures such as the price-to-earnings (P/E) ratio or price-to-sales ratio, and comparing them to those of the company’s peers and to the company’s own ratios over the past few years. (Many of these numbers can be found at sites such as Morningstar.com and Yahoo! Finance.) There are other ways to value a stock, too, many of them more involved.
For best investing results, seek companies that are apparently undervalued, growing and financially healthy (with little debt and ample cash). Once you find a great business selling at a good price, don’t panic if the stock price drops after you buy. Expect volatility and have patience as you wait for the stock to eventually approach its intrinsic value. Keep up with its progress over time.
You can learn more about studying companies at Fool.com/how-to-invest; you’ll find some stocks we think are good values in our Motley Fool Stock Adviser service at Fool.com/services.
My Dumbest Investment
From J., online: My most regrettable investment move was buying shares of Apple at around $73 apiece (adjusting for a stock split) in 2020 — and then selling them at $77 apiece a few months later. I had even promised myself that I was going to hold the shares for a couple of years. The worst thing is that I still don’t know why I sold!
The Fool responds: You’re far from alone in having sold your Apple shares too soon — many people have done so in order to net a modest gain, thereby missing out on stupendous returns. On the plus side, of course, you didn’t actually lose any money on this investment; you closed out your position with a 5% gain. But if you’d followed your plan to hang on for years, you would have doubled your money.
Though you don’t remember why you sold your shares, it might have made sense at the time. Here are some good reasons for selling: you need that money now, you’ll need that money within a few years (remember, the stock market is volatile), you’ve lost faith in the company or you found a much more promising investment to move the money into.
Here are some less good reasons for selling: it went up a bit, it went down a bit, others are selling or you’re impatient.
Who Am I?
I trace my roots back to 1835, when I was founded by a printer and bookbinder in Prussia. I printed mostly religious fare at first, then expanded. By the 1980s, I ran the Bantam Books imprint in the United States and then bought Doubleday and RCA Records; that made me the biggest trade-book publisher in the U.S., and RCA became the basis for my BMG music business. I’m now a major conglomerate that owns a famous publishing business, though my attempt to buy Simon & Schuster was recently blocked.
Can’t remember last week’s trivia question? Find it here.
Last week’s trivia answer: L.L. Bean