Beaten down META stock popped on Friday after shares in Facebook (opens in new tab) parent Meta Platforms (META (opens in new tab)) caught an upgrade from a prominent Wall Street analyst.
JPMorgan’s Doug Anmuth raised his rating on META stock to Overweight (the equivalent of Buy) from Neutral (Hold), and he raised his target price on shares as well.
The news helped META stock gap up nearly 6% at the opening bell, and builds upon bulls’ case that shares in the social media giant are a screaming bargain buy after suffering one of the more epic price collapses in recent memory.
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To put META stock’s market carnage in perspective, before Friday’s jump, shares had lost almost 70% of their value since hitting an all-time closing high of $382.18 on Sept. 7, 2021. META’s market capitalization, which peaked at $1.08 trillion not so long ago, is down to about $320.2 billion.
That’s smaller than Johnson & Johnson (JNJ (opens in new tab)) or Procter & Gamble (PG (opens in new tab)) or Walmart (WMT (opens in new tab)) – hardly companies with designs on being at the center of the next great revolution in tech.
Of course, META stock is so very down in the dumps precisely because Meta Platforms is burning through many tens of billions of dollars in cash in pursuit of its metaverse (opens in new tab) dreams.
And yet any time a name as admired and once high-flying as META stock goes into freefall, it’s only natural for analysts and investors to ask if shares are an irresistible bargain buy.
Fair enough. Selloffs are frequently overdone, after all. Stocks get beaten down beyond reason when emotions overwhelm a focus on the fundamentals.
Anmuth, and many of his colleagues on the Street, say that the above is indeed the case with META stock.
“[H]eading into 2023, we believe some of these top- and bottom-line pressures will ease, and most importantly, Meta is showing encouraging signs of increasing cost discipline, we believe with more to come,” Anmuth writes in a note to clients. The analyst also raised his price target to $150 a share from $115, which gives META stock implied upside (opens in new tab) of about 24% in the next 12 months or so.
And Anmuth is hardly alone in his ardor for the Facebook parent. Of the 56 analysts issuing opinions on META stock tracked by S&P Global Market Intelligence, 27 rate it at Strong Buy, 10 say Buy, 16 have it at Hold and two call it a Sell. Additionally, one analyst slaps a rare Strong Sell recommendation on shares.
That works out to a consensus recommendation of Buy, with fairly high conviction. Meanwhile, the Street’s average price target of $154.19 gives META stock implied upside of about 28% in the next 12 to 18 months.
True, there’s a Wall Street cliche warning folks about buying a stock when it’s collapsing as META is: Don’t try to catch a falling knife. In META’s case, not too long ago it looked more like trying to catch a falling Guillotine blade with your neck.
It’s just possible, however, that valuation has finally put something of a floor under shares. META stock is up 3.1% over the past month, vs. a decline of almost 4% in the S&P 500.
It could also be the case that recent revenue troubles are stabilizing at Meta Platforms, as Anmuth contends.
“Overall, while trends remain choppy and are also pressured by macroeconomics, we are at least hearing some early anecdotes of marketers and agencies bringing ad dollars back to Meta due to its scale and still strong return on investment,” the analyst says.
Over at Oppenheimer, analyst Jason Helfstein reminds clients that Meta Platforms remains the world’s largest social networking company, with 3.7 billion monthly users across all properties. That gives it enormous leverage across its extant businesses, and a huge leg up as it moves to building out the metaverse.
“While META’s historical advantage has been the social graph and the ability to share and follow pictures and videos uploaded by users, the company now believes it must evolve to use advanced algorithms to deliver content to users and leverage its social graph in the Metaverse,” writes Helfstein, who rates the stock at Outperform (the equivalent of Buy).
If Meta Platforms can deliver higher-than-expected monetization via Instagram (opens in new tab), Stories and video, as well as monetize its new e-commerce function and generate greater-than-expected user engagement, shares will one day look ridiculously cheap at current levels.
That’s the bull case – or part of it – anyway. And even META stock optimists acknowledge this is going to be a show-me stock for several quarters, at the very least.
Whether Meta Platforms can pull out of this nosedive very much remains to be seen. On the other hand, the idea is to buy low. If CEO Mark Zuckerberg and company can pull this off, META stock will have proven to be an absolute steal during what has become a truly dark period for long-term shareholders.