Meta Platforms | Fundamental Analysis |Long Setup|MUST READ 🔔

Meta Platforms stock has declined markedly over the past few months. After popping a 52-week high of $384.33 three months ago, shares of this technology company have fallen more than 19%.

Meta stock appears to be cooling off after a victorious 2020 and further strong gains this summer. The stock is also likely affected by increased media and government scrutiny of the company, as well as recent iOS changes that have negatively impacted Facebook's ad measurement and tracking.

But despite the bearish trend and some negative headlines about the business in the media, parent company Facebook's core business is doing well. Given that business is doing well and the stock is falling, is this a good buying opportunity for investors? Or should investors wait for further stock declines before considering buying Meta stock?

To understand how staggering Facebook's momentum is, let's look at some key metrics from the company's Q3 earnings report. Revenues were up 35% during the reporting period, mainly due to a 33% year-over-year increase in advertising revenue, and the total number of unique daily active users across all of the company's platforms rose 11% year-over-year to 2.81 billion. The number of unique monthly active users across all platforms rose 12% to 3.58 billion.

For the fourth quarter, Facebook is forecasting revenues between $31.5 billion and $34 billion, reflecting a significant seasonal increase over third-quarter revenues of $29 billion. The midpoint of this forecast range means a 17% year-over-year increase. However, Facebook's forecasts tend to be fairly conservative, so actual growth over the period is likely to be higher.

Investors should also keep in mind Facebook's impressive cash generation. The company's free cash flow for the nine months was $25.9 billion, up from $13.8 billion last year and $15.8 billion in the same period two years ago. Facebook's 12-month free cash flow was $35.8 billion.

This strong cash generation has resulted in a huge inventory of cash, cash equivalents, and marketable securities totaling more than $58 billion. This strong position combined with active cash generation has allowed Meta to actively repurchase stock. In the third quarter alone, the company repurchased $14.4 billion worth of its stock and announced a $50 billion increase in share repurchase authorization during its third-quarter results presentation.

With such strong fundamentals, it's hard to believe that the technology company's stock is trading at just 22 times earnings today. That's even more surprising when you admit that Meta's current consensus analyst forecast for its bottom line assumes earnings per share growth averaging 21 percent year-over-year over the next five years. Investors should not let Meta's recent stock decline and conservative valuation fool them. It is still a growth stock and should be valued as a growth stock.

While there is no way of knowing if this is the low point for the stock, investors who bought the stock today will likely have good results over the next few years. While there are certainly risks for Meta Platforms, including the changing digital advertising landscape, antitrust concerns, and competition from smaller social media companies such as Snap and Twitter, these risks seem to be largely embedded in Meta's conservative share price.