Everything goes on sale eventually. Even Meta Platforms Inc. (FB, Financial).
After a weaker-than-expected earnings report, the parent company of Facebook is now trading about 40% below its highs of $380 a share. Meta is also dealing with operating system changes that make its core businesses less profitable and regulatory scrutiny. Meta and its flagship Facebook are seeing slowing growth, but the sell-off could have been a market overreaction.
Is Meta a value stock?
A decade ago, the company formerly known as Facebook would have been considered a growth stock, the "F" of the FAANG acronym that also includes Apple (AAPL, Financial), Amazon (AMZN, Financial), Netflix (NFLX, Financial) and Google parent Alphabet (GOOG, Financial)(GOOGL, Financial). Today, the stock has a price-earnings ratio of around 14. The company’s valuation multiples have moved it from new startup of the 2000s to a value stock choice in 2022.
With the steep decline recently, this might be a good time to buy shares at bargain prices if you believe the company’s equities will rise. There are also reasons to be wary.
Bullish on Meta
Those who think Meta is a bargain right now are looking for the share price to rise. There are plenty of reasons to be bullish on the company: it is the world’s largest social media platform and it is shaping the metaverse, making it a force in the future. While the number of Facebook users being down was part of the recent plunge, Meta’s number of total social media users is slightly up.
Bearish on Meta
Those who think Meta hasn’t hit the end of its fall yet look at regulation that may limit its profitability. Rival platforms such as TikTok and Snap Inc.'s (SNAP, Financial) Snapchat are growing, and they think Meta’s advertising profits will fall and that it’s still overpriced.
TikTok is owned by China-based ByteDance, which is privately held. Younger social media users are downloading TikTok more than older apps such as Facebook, Instagram and WhatsApp.
Is now the time to buy?
As a value investor, a dip in a stock isn’t a bargain unless it fits within your overall asset allocation plans. However, if this company, with a market capitalization of nearly $1 trillion, was one you either already invest in or want to add to your portfolio, then now could be an excellent time to drive up your long-term profits on Meta shares by snapping them up at low prices.
