Why Is Meta Still on The Shaky Ground?

Given how much money Facebook and Instagram’s owner continues to pour into building its version of the metaverse, Meta Platforms Inc.’s market-beating rally of the past few months fails to convince some skeptics.

Since the stock’s recent low in November, Meta has been the best performer in the S&P 500 Index, with a 54% gain. The firm’s announcement that it will lay off more than 11,000 people, the company’s first large-scale layoffs in its history, contributed to the jump.

Regardless RIFs, Skepticism Persists

There are, however, several signs of doubt. Meta is one of the cheapest stocks in the Nasdaq 100 Index. Despite the stock’s recent price rally, it sells for less than half its typical price-earnings multiple. Analysts predict the stock will only increase by 7.7% over the next 12 months, 64% below its 2021 high.

From a bear’s perspective, Matt’s expensive venture into the immersive virtual metaverse isn’t going anywhere anytime soon. In addition, this year, it will account for a fifth of all expenditures. And as a result of changes in Apple Inc.’s privacy policy, which makes it more difficult to target consumers with advertisements on its devices, the company’s once-lucrative advertising business is stagnant.

What Are Some of The Implicit Investor Ultimatums?

Meta may need to give investors more certainty on certain points, such as its plan to compete with social media rivals like Tiktok, for the rally to continue.

Investors will also want to see how much of a squeeze Apple’s privacy policy change is putting on advertising revenue. This could be especially crucial. Meta predicted that Apple’s shift would result in a $10 billion revenue loss for the year in February.

Others, however, believe that Facebook CEO Mark Zuckerberg will trim more or quit his Metaverse ambitions and spending altogether. The approaching economic downturn, which is reducing sales at technology firms, might force his hand.