Meta Platforms Inc., the parent company of Facebook, has experienced an unprecedented rally, with its shares nearly quadrupling since the lows of November last year. According to a Bloomberg report, this surge comes on the heels of a historic $251 billion crash in February, making it the largest one-day stock wipe-out in history.
Despite the setback, Meta has emerged stronger, with 62 out of 70 analysts tracked by Bloomberg now giving the social media giant buy-equivalent ratings, marking the highest confidence level since its IPO in 2012.
Stifel Nicolaus analyst Mark Kelley, among the bullish voices, emphasised the investment appeal beyond the metaverse narrative. “We don’t think you have to be a believer in the metaverse story to like the stock,” Bloomberg quoted him as saying. He attributes the stock’s attractiveness to advertisers recognising Meta’s unparalleled scale compared to competitors, such as TikTok Inc. The shift in sentiment highlights Meta’s successful efforts in regaining investor support after last year’s downturn.
Analyst projections for Meta’s profitability are on an upward trajectory, reflecting the positive sentiment. Wall Street now expects the company to generate approximately $18 per share in earnings next year, a substantial increase from the $10 anticipated a year ago, according to Bloomberg’s compiled data.
However, Needham & Co.’s Laura Martin, one of the few dissenting voices, remains sceptical, citing rising competition and potential challenges from mobile operating system changes like Apple Inc.’s iOS. According to Bloomberg, he expressed concerns about Meta’s competitive advantage, stating, “TikTok is eating them alive.”
Despite the surge in Meta’s valuation this year, currently standing at about 18 times earnings projected over the next 12 months, the social media giant remains the most affordable among the seven major technology and internet stocks. It also holds a discount compared to both the Nasdaq 100 and S&P 500 indexes.
Sylvia Jablonski, co-founder and chief investment officer at Defiance ETFs, sees Meta’s priorities in the right place, anticipating benefits from artificial intelligence and growth in digital ad spending in the years to come. Jablonski expressed her interest in a long-term investment strategy, “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,” Bloomberg quoted her as saying.
Drawing a historical parallel, the article notes the diverging fortunes of dot-com era darlings, Microsoft Corp., and Cisco Systems Inc. While Microsoft has grown over six-fold from its dot-com highs, Meta’s contemporary, Cisco Systems, has yet to recover from its historic crash in the turn of the century, with its stock still trading about 36 per cent below its all-time high set in March 2000.
(With inputs from Bloomberg)