Meta Platforms, Inc. (formerly known as Facebook) is one of the world’s largest technology and social media companies. Its flagship products include Facebook, Instagram, WhatsApp, and Oculus. As a publicly traded company, investors are constantly evaluating if Meta is a good stock to buy or sell. There are several factors to consider when determining if Meta is a buy or sell right now.
Meta’s Financial Performance
One of the most important factors to examine is Meta’s financial performance. How much revenue and profit is Meta generating? Is revenue and profit growing or declining? Let’s look at some key financial metrics for Meta:
| Metric | 2022 Q3 Results | Year-Over-Year Change |
| Revenue | $27.7 billion | -4% |
| Net Income | $4.4 billion | -52% |
As we can see, Meta’s revenue and net income declined in Q3 2022 compared to Q3 2021. This indicates some financial struggles for the company. Revenue dropping 4% and net income plunging 52% are not positive signs. However, Meta still generates significant profits. It’s important to note this quarterly data is just a snapshot – we’d want to examine the longer-term financial trends for Meta as well.
Meta’s User Growth Trends
In addition to financials, user growth trends are crucial for social media platforms like Meta. If user growth stalls or declines, it spells trouble for revenue and profits down the road.
| Platform | Monthly Active Users (Q3 2022) | Year-Over-Year Change |
| 2.96 billion | +2% | |
| 2.00 billion | +10% |
This data shows Meta’s flagship platforms Facebook and Instagram are still growing their user bases annually. However, Facebook’s user growth rate is slowing at only 2%. Instagram is growing faster at 10%, but is still decelerating from previous growth levels above 20%. Slower user growth could hamper revenue growth potential moving forward.
Industry and Competitive Forces
In addition to Meta’s internal financials and user growth, it’s important to analyze the external industry and competitive forces impacting the company:
- Declining digital ad spending – This impacts Meta’s core advertising revenue
- TikTok competition – Meta is losing engagement, especially among younger users, to this fast-growing rival.
- Apple iOS privacy changes – These make digital ads less effective on iPhones.
- Increasing social media regulation – More countries are looking to regulate big tech companies.
These forces all pose challenges for Meta. They could restrict the company’s revenue growth, increase costs, and hinder user engagement. Meta faces substantial competitive and regulatory headwinds in the coming years.
Meta’s Growth Investments
Meta is spending heavily to transition its business and diversify revenue. Key growth initiatives include:
- Reels – Competing with TikTok in short-form video
- Metaverse/virtual reality – Developing an immersive digital universe
- Artificial intelligence – Using AI to improve ads and user experience
- eCommerce – Expanding shopping features across apps
These efforts open up new revenue streams for Meta outside of digital ads. However, they require immense upfront investment in research and development. It will take years for them to generate meaningful profits, if they ever do. This increases costs in the near-term while Meta hopes for long-term payoff.
Valuation Metrics
With the key factors assessed, let’s examine Meta’s current valuation metrics to determine if the stock appears cheap or expensive:
| Metric | Meta | Technology Sector Average |
| P/E Ratio | 11.6 | 20.1 |
| P/S Ratio | 3.0 | 3.7 |
| P/B Ratio | 2.4 | 3.7 |
Compared to sector averages, Meta’s valuation looks relatively inexpensive. The company trades at discounts on P/E, P/S, and P/B ratios. This suggests the stock may be undervalued given its growth potential. The market is pricing in the near-term risks and metaverse investment costs.
Wall Street Analyst Ratings
Seeing what Wall Street analysts think of Meta can provide useful insight. Here is a summary of recent analyst recommendations:
| Rating | Percentage of Analysts |
| Buy | 60% |
| Hold | 33% |
| Sell | 7% |
A majority of analysts currently rate Meta as a buy or overweight. They see the risks reflected in the stock price but expect a turnaround in growth. The analysts average 12-month price target of $227 implies ~50% upside from current levels. This indicates most experts see Meta as undervalued right now.
Conclusion
In summary, Meta is facing some strong revenue headwinds and uncertainty in the near-term. However, the company generates strong profits, owns leading social media assets, and trades at a reasonable valuation. The massive investments into the metaverse and AI could pay off handsomely in the long run. Considering these factors, Meta appears to be a good value investment at current prices for long-term investors. The risks are reflected in the stock’s underperformance and analyst consensus supports additional upside. For investors with a 3-5 year time horizon, Meta seems to be an attractive buy around current levels.