Meta Platforms (NASDAQ:META) stock has significantly underperformed the broader markets this year. META stock has lost more than 62% of its value this year, compared to about a 25% decrease in the S&P 500 Index (SPX). Further, the social media giant is struggling to drive its user base amid increased competition and a weak macro environment, indicating more pain ahead.
Recently, the Wall Street Journal reported that Meta’s flagship metaverse offering, Horizon Worlds, finds it difficult to attract users. Citing an internal document, the WSJ reported that Horizon Worlds could not meet the company’s expectations of reaching 500K MAUs (monthly active users) by the end of this year. Given the challenges, Meta has cut its forecast to 280K MAUs.
While the metaverse opportunity is promising, it is still in a nascent stage and could take years to meaningfully support META’s financials.
On the other hand, Meta Platforms is taking measures to drive user engagement. Recently, it changed its Facebook Feed to allow users to see what’s most relevant to them. However, increased competition from TikTok, a shift towards short-form videos, and macro weakness continue to pose challenges.
Is META a Buy or Sell?
Most Wall Street analysts recommend a Buy on META stock despite the challenges. It has received 26 Buy, six Hold, and two Sell recommendations for a Moderate Buy consensus rating. Further, these analysts’ average price target of $207.73 implies 63.9% upside potential.
Meanwhile, hedge funds have bought the dip in META stock. TipRanks’ data shows that hedge funds accumulated 4.5M Meta Platforms stock last quarter. Moreover, META stock has an Outperform Smart Score of eight out of 10 on TipRanks.
