S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Public Service Announcement: New National Emergency Incoming (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Better Than Oil Stocks (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Better Than Oil Stocks (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Public Service Announcement: New National Emergency Incoming (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Better Than Oil Stocks (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Better Than Oil Stocks (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Public Service Announcement: New National Emergency Incoming (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Better Than Oil Stocks (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Better Than Oil Stocks (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Public Service Announcement: New National Emergency Incoming (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Better Than Oil Stocks (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Better Than Oil Stocks (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024

Zuckerberg sells Meta, Snowflake may be the better choice

Snowflake logo and sign at the company's corporate hq

Key Points

  • Mark Zuckerberg has sold some of his Meta stake, and the evidence points to his reasoning being on point, as the stock has reached fair value today. 
  • Analysts seem to agree with the timing of the sale, but where will markets find the next tech rally?
  • Snowflake has proven to be the new favorite child, with all the stars aligning for a recent rally in the name.
  • 5 stocks we like better than Meta Platforms

After a wild year in the stock market, 2023 leaves one sector that takes the crown as a clear winner. Technology stocks have been all the hype in the past few months, bringing new hopes of an economic recovery and shaking away the fears sparked by interest rate hikes.

The charts don't lie. The price action in the Technology Select Sector SPDR Fund NYSEARCA: XLK after beating the S&P 500 by as much as 29.3% on a year-to-date basis solidifies the sentiment toward this group.

One of the biggest winners in the technology sector is Meta Platforms NASDAQ: META. The stock has jumped from roughly $120 a share at the beginning of the year to today's $317 a share. However, it seems the rally has run out of steam as CEO Mark Zuckerberg sold $185 million worth of META stock.

What changed?

The stock recently fell from a high of $342.9 a share to its current $316.5, a decline of almost 8.0% in just two trading weeks. Some may have seen this decline coming, as the market had been quietly leaving some breadcrumbs as evidence of their current sentiment toward the stock.

Taking the industry as a whole, you can see how the average price-to-earnings ratio of 35.3x creates a wide gap compared to where the market values Meta today. Sitting at a 22.3x P/E, there seems to be little willingness to pay up for the underlying earnings of this business.

In other words, the rally has been exhausted. Today's stock price reflects some closeness to the company's fair valuation. Looking at analyst price targets may confirm the theory that Zuckerberg decided to sell at the right time. After all, who knows the fair value of the company better than the founder himself?


With a consensus of $349.5 a share target, analysts see only a 10.3% upside from today's prices. This is close to where the stock traded right before the two-week decline and likely where Zuckerberg also decided to sell some of his stake. 

More than that, analysts had projected earnings per share to rise by as much as 23.1% this year, and when everything else is the same, stock prices should behave in line with the growth or decline of EPS.

Considering that the stock more than doubled, it would be safe to say that any remaining EPS growth is already priced into the stock. If that doesn't convince you, think about Zuckerberg getting the best of you after he dumped a fairly valued stock.

So, what are markets to do now that one of their favorite trades has run its course? Well, bonuses still need to be earned, so they are looking into another success story, this time in Snowflake NYSE: SNOW, but more on that in just a bit.

A new favorite

Using the same approach to determine where the new industry favorite may be found, you can again compare the average P/E of 35.3x against a significant outlier like Snowflake. This stock trades significantly above the industry at 282.9x. A market willingness to overpay for this company's earnings can only come from one place.

While the industry is expecting to grow its EPS by an average of 16.6%, analysts are happy to place a growth rate of 48.5% for Snowflake. An industry-beating growth rate can surely justify a premium valuation.

Based on these ratios alone, the story begins to make a lot of sense, but have markets already eaten away at the upside as well? The latest financial results from the third quarter of 2023 reiterate that this is one booming business with a stock that keeps breaking new ceilings.

Some bears thought the passing of the COVID-19 pandemic would put a dent in this cloud business. However, with revenues alone rising by as much as 34% over the past twelve months, Snowflake is far from a dying business. 

Now, all software companies can have a streak of good luck, but a retention rate of over 100% indicates that Snowflake's success is not just a quarterly fluke but a brand penetration - and adoption - story that is likely here to stay.

Management is aware of the rising sentiment and momentum in the stock. Counting on continued financial expansion, they have decided to repurchase up to $400 million worth of stock, representing roughly 1.0% of the company's market capitalization. Talk about confidence!

With a recent rally of 32.1% during the same time that Meta declined from its highs, there is not much else to say other than the markets have picked a worthy replacement to Meta.

→ NEW: Federal Reserve launches bank account overhaul (From Stansberry Research) (Ad)

Should you invest $1,000 in Meta Platforms right now?

Before you consider Meta Platforms, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Meta Platforms wasn't on the list.

While Meta Platforms currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Beginner's Guide to Pot Stock Investing Cover

Click the link below and we'll send you MarketBeat's guide to pot stock investing and which pot companies show the most promise.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Technology Select Sector SPDR Fund (XLK)N/A$205.28-0.2%0.63%20.04HoldN/A
Snowflake (SNOW)
3.7766 of 5 stars
$229.34+1.6%N/A-85.57Moderate Buy$203.25
Meta Platforms (META)
4.0219 of 5 stars
$484.03-0.4%0.41%32.49Moderate Buy$494.53
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


Featured Articles and Offers

Snowflake Stock's Bullish Tailwind Now a Powerful Force

Snowflake Stock's Bullish Tailwind Now a Powerful Force

Snowflake continues to outperform its expectations and give solid guidance, spurring the analysts to raise their targets and lead the market higher.

Search Headlines: