How to buy Meta stocks in 2022
This guide explains how to buy Meta (ticker symbol: MVRS) stock and takes you through the most important things you need to know in order to do so successfully. Before that, let’s go through a brief overview of the company.
Meta is a holding company that was formerly known as Facebook. It’s most famous as one of the most popular social media websites in the world that has dominated the space for more than a decade. Along with Facebook, Meta also owns Instagram and WhatsApp, and predominantly makes its money through online advertising.
Its name change from Facebook to Meta reflects a shift in the company’s priorities. Now far more than ‘only’ a social media business, it keeps expanding its service to include more adventurous offerings. The latest trend has been a shift towards virtual reality and into the ‘metaverse’.
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Everything You Need To Know About Meta
Before we dive into the financial analysis, let’s take a look at some of the most basic things you need to know about Meta.
Meta was formed, as Facebook, by Mark Zuckerberg while he was a student at Harvard University in 2004. The social networking site that allowed its users to set up profiles and connect with each other took the university scene, then the country, and then the world by storm over the course of the next few years. By 2012 it was large enough to become a publicly traded company, and its IPO was the third-biggest in history up to that point.
One of the features of Facebook’s rise has been the controversies that have followed in its wake. Going right back to its foundation, when Zuckerberg was accused of plagiarism within a week of setting up the site, negative stories have been a regular occurrence. The weight of negativity may well have played a part in the decision to change the company’s name to Meta in 2021.
What is Meta’s Strategy?
Meta is in the middle of a transition from a purely advertising and social media focused business to a dual-headed monster. In 2021, it shifted its strategy to focus more on virtual and augmented reality. This wing of the business, which exists under the umbrella of ‘Facebook Reality Labs’, is going to eat up more than $10 billion worth of investment every year for the next few years, in the expectation that it sets the company up to be a leader in this space in the future.
How Does Meta Make Money?
The majority of its revenue comes from online advertising. Meta sells ad space on its platforms to marketers and has powerful targeting algorithms that allows it to identify users based on their activities and interests as well as personal information like their age and gender.
How Has Meta Performed in Recent Years?
Despite all of its publicity issues, Meta’s stock price tripled in the five years from 2016 to 2021. Political and cultural scandals, like that which included the company’s ties to Cambridge Analytica and how it affected the outcome of the 2016 Presidential Election, had very little impact on its stock price.
It’s one of the largest companies in the world and forms one part of FAANG; the tech quintet that dominates the stock market and is used to collectively refer to Facebook (now Meta), Apple, Amazon, Netflix, and Google.
Where Can You Buy Meta Stock?
Buying shares (or stock) of a company means taking part ownership of the company, which is different from simply placing a bet on the company’s share price by placing a CFD trade or spread bet. As such, you buy company stock via a stockbroker rather than via one of the popular trading platforms, although some providers allow you to do both things: buy stock or place a trade (or bet).
Your bank may well have a share dealing arm, and several independent stockbrokers will let you open a share dealing account.
Meta Fundamental Analysis
A company’s ‘fundamentals’ refer to its basic financial performance. It’s usually analysed in terms of key metrics that indicate whether the company is growing, and whether its share price is an accurate reflection of the underlying health and success of the business. Below we take a look at what each of these metrics means.
Revenue is a simple enough concept to understand because it refers to the amount of money a company brings in. It is calculated as a raw figure, before deducting any costs, like operating costs or taxes, and it’s normally the first number you’ll see on a company’s financial statement. Revenue is reported either as an annual figure or as a quarterly one, and it’s the most top-level way to see whether a company is growing or not.
As a shareholder, a company’s earnings-per-share is an important figure because it tells you what your stake in the business is worth. A company’s earnings-per-share (EPS) is calculated by just deducting all its costs from its total revenue, then dividing that figure by the number of shares in existence. The EPS is reported on a company’s financial filing.
Meta’s P/E Ratio
The price to earnings (P/E) ratio refers to the amount of money a company makes relative to its stock price. It’s calculated by dividing the current share price by the earnings-per-share. The figure you get tells you how much investors are willing to pay for each $1 of revenue.
P/E ratio is a good way to judge whether a company is ‘overvalued’ or ‘undervalued’ or, to put another way, how much hype there is around a company at any given time. Traditionally, a price to earnings ratio of more than about 25 is high, and means that investors are paying a premium now because they expect the company to generate a lot more revenue in the future.
Meta’s Dividend Yield
Dividends are a way for investors to generate steady income over time and a company’s dividend yield tells you how much it pays out every year. The yield is given as a percentage and it refers to how much of the share price is paid back to you in dividends each year.
Payouts are usually made either twice a year or quarterly and the yield calculation is based on the cumulative total of these payouts. If the company’s share price was $1 and you were paid $0.01 total in annual dividends, the dividend yield would be 1%.
Unfortunately, not every company pays a dividend. Modern companies tend to prioritise reinvesting their profits in order to grow - and thus provide shareholder value by increasing the share price - rather than using them to pay out dividends. This is the case for Meta, which has never paid a dividend and is unlikely to start anytime soon.
Meta’s Cash Flow
Cash flow is the last key financial metric that you should know about, and it’s reported on a company’s financial statements. What you should be interested in specifically is the free cash flow, which is the money a company has left over after paying all its other costs.
Free cash flow is good because it gives a company lots of options. It can invest it in research and development, buy capital equipment, or use it to pay dividends to shareholders. All of which are good news for you. Meta has routinely had billions available in free cash flow and it is one of the reasons it has been such a popular investment opportunity over the past few years.
Why Buy Meta Stocks?
Meta is undoubtedly a quality investment if you consider the financials of the company. Its past performance is excellent, it has lots of money readily available, and its PR issues meant that its shares aren’t as expensive as some of its competitors relative to the revenue it generates.
The negative publicity is an issue that you need to consider, however. If you are willing to accept the risk that future investigations into its conduct could have, then there are many reasons to invest in Meta. Here are a couple of them:
A well-established, popular company that consistently reports big profits
It has big and disruptive ideas to stay at the forefront of the technology industry
It is diversifying to reduce its reliance on its social media platforms for revenue
Expert Tip on Buying Meta Stock“ Since the Meta share price could be volatile, it may be a good idea to buy shares on a “quote and deal” basis or by placing a “limit order” so that you don’t pay more for your shares than you really want to if the price spikes up. To put this another way, it might be best not to place an “at best” buy order outside of market hours. ”- Jayson Derrick
5 Things to Consider Before You Buy Meta Stock
Here are five key points for you to think about before you put money into Meta.
1. Understand the Company
Take the time to understand what Meta does and how it makes its money. You need to know what sort of factors could affect its ability to keep making money, such as its competitors and how easy it is for new competition to join the market.
This means more than just deciding whether you think a company makes a good product. In Meta’s case, the fact that it makes so much of its money from online advertising means you need to think of Google and Amazon as direct competitors, as well as other social media companies.
2. Understand the Basics of Investing
Being a successful investor is about more than just picking stocks. Make sure you understand how to invest and manage your money, which means thinking about things like dollar-cost averaging and portfolio management to make sure that you can cope with unexpected developments in the stock market.
3. Carefully Choose Your Broker
A broker is an indispensable part of owning shares and so you should take time to choose the right one. If you’re going to be active in terms of buying or trading lots of shares, then a broker that charges low trading fees is best. Alternatively, long term investors might want to think about a broker that offers tax breaks for holding shares or includes other money management features as well.
4. Decide How Much You Want to Invest
The most important thing to remember is to never invest more than you can afford to lose. Beyond that, how much you should invest depends on your individual circumstances and it can be as much or as little as you like.
Something that applies to all investors, however, is the fact that you should always spread your money around into different financial assets. Don’t leave yourself entirely reliant on the performance of one stock. Instead, split your money up and put it into a variety of different investments, ideally at different times, to create the safest portfolio possible.
5. Decide on a Goal for Your Investment
Before you start, take some time to decide how long you want to invest your money for and what you want to achieve from it. The answers to those questions can help you craft a strategy, because a young investor looking to save for retirement has far more options than someone trying to make a quick buck.
In general, a long term approach is best. The stock market has traditionally outperformed savings accounts when you compare them across decades. Even if you only have a small amount of money available now, you can gradually build that up into a substantial number if you’re willing to lock it up for many years.
What Should I Do Next to Buy Meta Stocks?
It’s time for a quick summary on what we’ve learned in this guide.
Meta is the name of the holding company that owns Facebook, WhatsApp, and Instagram, among many other businesses. It makes most of its money from selling online advertising space but it’s constantly innovating and wants to branch out into virtual reality over the next few years.
To invest in the company right now, you need to sign up for an online stock broker account. That process normally only takes a few minutes and once you’ve added some money to the platform you can start buying shares straight away.
Frequently Asked Questions
It’s listed on the NASDAQ, a US stock market where most leading technology companies are available. Its stock ticker symbol is FB at the moment but that is going to change to MVRS soon and so you might need to search for both on your stock broker account in order to find it.
It’s very unlikely that Meta will start paying dividends in the near future. It has always invested money back into growing the company, and it has committed to significant spending over the next few years in order to develop its virtual reality arm.
There is a type of order known as a ‘stop-loss’ order that you can place in advance. This order can be set to execute when the price of a stock falls to a certain level. It’s a good idea to use it to prevent huge losses, but be careful about setting the order to fire at a too-high price, because then you might see your shares sold during a small correction.
Technical analysis is a good way to identify the right time to buy or sell a stock because it gives you a window into how other traders might act. You can use this analysis to predict future price moves. However, the best decisions are made with a combination of technical and fundamental analysis, so don’t neglect the long term outlook entirely.