Meta Platforms Overcomes Historic Stock Wipeout to Regain Favor With Analysts
After the biggest one-day stock wipeout in history, Meta Platforms Inc. has managed to bounce back and earn favorable ratings from analysts. The Facebook owner’s shares have nearly quadrupled since a low in November last year, recovering from a $251 billion crash in February.
According to Bloomberg, 62 of the 70 analysts tracking the social media giant have buy-equivalent ratings on the stock. This level of confidence is the highest since the company’s initial public offering in 2012.
Stifel Nicolaus analyst Mark Kelley is among the many analysts with a buy rating, stating, “We don’t think you have to be a believer in the metaverse story to like the stock.” Kelley believes that the investment thesis is backed by advertisers, pointing to the company’s unmatched scale relative to competitors, including TikTok Inc.
Meta’s profitability projections continue to rise, with Wall Street now anticipating the company will generate about $18 a share in earnings next year, compared to expectations of about $10 a year ago.
However, not all analysts are convinced that Meta is on the right track. Laura Martin from Needham & Co. believes the company’s core business is at risk from rising competition and potential changes to mobile operating systems like Apple Inc.’s iOS that could hurt Meta’s ability to target users with ads.
Nancy Tengler, chief executive of Laffer Tengler Investments Inc., is cautious on the stock and sees limited upside potential. She stated, “I haven’t really been thrilled with the leadership, even though the stock price has delivered and they cut costs.”
Despite differing opinions, Meta’s valuation remains favorable compared to other tech and internet stocks, trading at about 18 times earnings projected over the next 12 months. This makes Meta the cheapest among the seven biggest technology and internet stocks and trades at a discount to both the Nasdaq 100 and S&P 500 indexes.
Sylvia Jablonski, co-founder and chief investment officer at exchange-traded funds firm Defiance ETFs, is optimistic about Meta’s future, stating “I’m interested in picking up shares for a long time horizon as the decade of machine learning, AI and all things digital growth continues to take shape.”
Meta’s resurgence and analyst support come as the company focuses on cost-cutting and toned down metaverse rhetoric, while also experiencing resurgent revenue growth. The company’s priorities and strategic decisions will continue to be under scrutiny as it navigates ongoing changes in the digital landscape.