Meta Platforms (NASDAQ:META) stock is under pressure and has lost over 72% of its value year-to-date. Heightened competition, the slowdown in user growth, and economic weakness impacting ad revenues took a toll on Meta stock. Given the significant erosion in value, the negatives appear to be priced into the stock. Further, improving engagement could push META stock higher.
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Investors should note that Meta’s products and engagement are showing improvement. Its CEO, Mark Zuckerberg, said during the Q3 conference call, “There has been a bunch of speculation about engagement on our apps. And what we are seeing is more positive.”
Zuckerberg added that the number of users using Facebook daily “is the highest it’s ever been,” and engagement trends are very strong. Further, Instagram has over 2 billion monthly actives, and Reels is “gaining time spent share on competitors like TikTok.”
Taking note of improving engagement, Wells Fargo analyst Brian Fitzgerald maintained his bullish outlook on META stock. The analyst said that the time spent on its platform is up, and Reels is gaining share over TikTok. He added that the “Reels monetization gap is narrowing,” which is positive.
Echoing similar sentiments, Robert W. Baird analyst Colin Sebastian recommends buying the dip in META stock. Sebastian added, “usage and engagement of Meta apps accelerated, Reels is making progress, and messaging is already a $9 billion run-rate business.” Sebastian suggests buying Meta Platforms stock on this pullback.
Is Meta Platforms Stock a Buy, Sell, or Hold?
On TipRanks, Meta Platforms stock has received 23 Buy, 10 Hold, and three Sell recommendations for a Moderate Buy consensus rating. Further, due to the recent decline in META stock, the analysts’ average price target of $144.72 implies 55.35% upside potential.
Along with analysts, META stock has a positive signal from hedge fund managers, who bought 4.5M shares last quarter.
META stock is still trading at a discount to its peers. Its forward Enterprise value-to-EBITDA multiple of 4.86 is lower than the sector median of 7.64. On its valuation, Sebastian said, Meta “deserves a valuation premium to peer averages due to superior growth prospects, platform scale, and technology orientation.”
Bottom Line
The improving engagement trends across its platform are positive and will support the recovery of META stock. However, a weak macro environment could hurt its near-term prospects. Also, adverse currency movements and cost headwinds could continue to pressure META stock in the short term.
