Mark Zuckerberg, Chief Executive Officer of Meta Platforms
Wednesday could be the day that Meta Platforms, the parent company of Facebook and Instagram, recovers from its all-time low.
The social media behemoth’s stock has been in freefall recently. Following disappointing quarterly profits and a bleak outlook, Meta (ticker: FB) plunged last week, registering the greatest one-day market value drop in US history on Feb. 3, when the stock price fell by 26%.
As of Tuesday’s close, the shares had plummeted about 42% from their September all-time high.
Things may be improving: Meta’s stock was up 2.7 percent Wednesday, beating the broader technology sector’s gains. The
The Nasdaq Composite Index, which monitors some of the largest technology companies in the United States, increased 1.5 percent.
Are investors finally snapping up bargains? When Meta began its plummet last week, market participants were already discussing doing just that, and this could indicate the start of a new wave of wagers on the stock.
“We have a significant position in Facebook, and we believe this is an excellent opportunity for long-term investors to acquire a fantastic franchise that has been sold off for very short-term reasons,” Christopher Rossbach, chief investment officer at Anglo-Swiss asset manager J. Stern & Co., told Barron’s.
Statistically, the stock appears to be undervalued. Meta is selling at a 17-to-one multiple of this year’s estimated earnings, a 40% discount to its peers. And that is a strongly forward-looking measure: The price-to-earnings (P/E) ratio is calculated using a profit estimate based on consensus projections from FactSet-surveyed analysts. That earnings estimate was significantly reduced following Meta’s altered forecast.
“It’s dirt inexpensive,” Rossbach explained. “When you consider the valuations paid for various sorts of firms, I believe that given the scale and sustainability, this is an incredible opportunity at these pricing.”
Analysts are mostly optimistic on Meta at the moment. The average broker target price — which was significantly raised upward following the company’s results report — is $329.28, representing a 50% increase from Tuesday’s closing level. This objective is also 2% higher than Meta’s stock price prior to its previous decline.
Having said that, there is still a larger discussion to be conducted over whether Meta stock is truly attractively valued at the moment.
The absence of a significant rebound to date indicates that the majority of investors did not buy the dip, which, as Barron’s observed, “reflects the fundamental difficulties Meta raised with its earnings.”
Wall Street has been deciphering Meta’s results. The most pessimistic reading implies that users are abandoning the site in favour of rivals such as TikTok, and that advertising revenue is drying up as a result of the platform’s modifications.
‘s (AAPL) data privacy policies.
If these demands were part of a broader trend, they might have been more digestible. Indeed, social media stocks are surging.
(PINS) both took a dive following Meta’s results announcement, as investors feared they might suffer the same fate. However, this was not the case with Snap and Pinterest; both firms have recently disclosed earnings that demonstrate they are not experiencing the same issues.
Meta’s problems appear to be unique to Meta. And this may make forecasting the future more difficult.
However, for bulls such as Rossbach, these headwinds are temporary and largely irrelevant.
“When you look at the underlying metrics, they remain incredibly solid. I believe the platform has a plethora of levers across all three of its primary apps to continue delivering value to its users,” the asset manager explained.
Rossbach emphasised the prospects for e-commerce via Instagram and emphasised the importance for CEO Mark Zuckerberg to acknowledge TikTok’s pressure, both as a matter of fact and in light of Meta’s ongoing regulatory scrutiny over competition issues.
“I believe the shares have overreacted, particularly to the apparent slowing in user growth,” he continued, noting that the company’s 3.6 billion users represent a sizable portion of people with internet access who can access its services. “It’s something that has to be accepted as part of the company’s maturation.”
Additionally, the asset manager emphasised how Meta has previously faced apparent existential risks, including concerns about the company’s ability to reach users via mobile and its ability to monetise various services.
“They have a track record of resolving those issues,” Rossbach added.
Wednesday’s market action may indicate that the worst is gone for Meta. Perhaps it is, as investors continue to pour money into the stock market. However, there is little doubt that the group confronts difficulties, which may be reflected in the stock price over the longer term. There may be dip buyers, but that does not guarantee a rise.