Meta Stock: Weakest Link In FAANG?

Shares of Facebook parent company Meta Platforms (FB) are attempting to put in a bottom after a catastrophic decline. It’s hard to believe that such an established FAANG stock could lose over half of its value in a matter of months. 

It took a perfect storm of negatives, including a brutal quarter, continued backlash and a broader tech sell-off, to do it, but here we are, with FB stock now going for 14.8 times trailing earnings.

Undoubtedly, Meta stock resembles a value trap. A 50% drop is enough for any investor to reconsider the firm’s membership in the exclusive FAANG cohort. The company’s longer-term vision of building out the future of the metaverse seems even more far-fetched now that “attractive growth stories” and sizeable TAMs (Total Addressable Markets) are no longer enough to induce sustained rallies.

Still, I think investors are discounting the staying power of Facebook, Instagram and Meta’s family of apps. They’re wildly profitable and are unlikely to wither away anytime soon, even if the latest quarterly reveal showed evidence of a DAU (Daily Active User) slowdown in Facebook. I’m bullish.

Facebook: Moving On

CEO Mark Zuckerberg is up against it. His actions seem to be adding salt to the wounds of the stock’s sell-off. Whether it’s renaming his firm to Meta or pointing the finger at fellow social media company TikTok, I do think that anything Zuckerberg says seems to be taken the wrong way these days.

I don’t think Meta will make its way into the top 100 most-loved companies anytime soon. The company’s public relations nightmare may be far from over. That said, the stock has become so absurdly undervalued that I remain bullish despite all the negatives that I’m sure we’re all aware of by now.

While the road ahead seems to be set on the metaverse buildout, future iterations of the company’s Oculus platform, and other off-the-radar innovations to keep up with the times, I think the real needle-mover for Meta lies in its ability to adapt with its Family of Apps.

Specifically, Facebook and its Reels feature that seems to be an intriguing counter to the incredible rise of TikTok.

A Reel Jab at TikTok?

For now, Reels has had limited success. Many videos on Reels have the TikTok logo. In due time, though, I do think Facebook could improve its platform in such a way that consumers post on Reels first, then TikTok. The reputational damage could hurt Facebook, as it looks to beckon in users that are fleeing to other platforms.

Still, the valuation in FB stock already suggests a big chance that the DAU weakness at Facebook has just begun. If Facebook can get Reels right, as it has with Facebook Stories, TikTok may be just another rival to keep tabs on, rather than an existential threat.

Wall Street’s Take

According to TipRanks’ consensus rating, FB stock comes in as a Moderate Buy. Out of 45 analyst ratings, there are 31 Buy recommendations, 13 Hold recommendations and one Sell recommendation.

The average Meta price target is $326.56, implying an upside of 60.5%. Analyst price targets range from a low of $220 per share to a high of $466 per share.

Bottom Line on Meta Stock

The metaverse spending probably won’t yield anything profitable over the medium term. Reels and other innovations like NFTs within Instagram to bolster the social media Family of Apps are crucial to propelling FB stock back to its highs. 

With the cards stacked so heavily against Zuckerberg and his team, I think the current price of admission heavily discounts the firm’s ability to adapt.

This isn’t the first time Facebook has had to hustle to play ball with hot, new social media firms. Though long-lasting reputational damage is a concern for Facebook, I think it’s tough for fundamentalists to pass on the stock at these depths.

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