Web money

Meta shares are hard to sell

In most market environments, a company with one of the lowest valuations on the Nasdaq 100 index, a strong balance sheet, and average sales growth of 34% per year would be an obvious buy. In the case of Meta Platforms Inc., it’s not so obvious.

Since Mark Zuckerberg announced a name change and overhaul of the Facebook owner’s strategy a year ago, the stock has erased more than half of the gain it had posted since its listing. on the stock market ten years ago. It cost Meta $600 billion in market value and a place in the elite club of America’s 10 largest corporations.

Analysts predict Meta’s revenue will plummet this year for the first time ever, as competition and cooling economies, among other factors, reduce ad sales. User growth for its flagship Facebook product has slowed as a younger generation flocks to newer sites like TikTok. Meanwhile, the company is spending billions to realize Zuckerberg’s vision of the metaverse, that yet-to-be-realized virtual world where people will work, shop and socialize.

“There are so many red flags relating to Meta,” said Matthew Kanterman, research director at Ball Metaverse Research Partners.

Which brings us back to where Meta is an obvious buy. So-called value investors, who like stocks that are largely overlooked, have already started taking positions in the company this year. They may find it even more attractive now that it’s priced at just 10 times forward earnings, compared to an average of 28 over the past decade and cheaper than dotcom-era tech favorites such as Intel Corp. and Cisco Systems Inc.

Analysts expect sales growth to resume in 2023 and rebound to double digits the following year. The Menlo Park, Calif.-based company is focused on capitalizing on Instagram Reels, rival video-sharing app TikTok.

And Zuckerberg said last month that the company would freeze hiring and restructure some teams to cut expenses and realign priorities, an acknowledgment that its days as a growth darling are over.

“While macro challenges persist, we believe improved monetization of Reels, new ad formats and greater focus on spend create compelling risk/reward in equities,” wrote analyst Ronald Josey. at Citigroup Inc., in a report last week. He sees the stock gaining 70% next year.

Still, Meta is one for the brave in a world where tech stocks face an uphill battle of rising interest rates. The stock has fallen 61% in 2022, nearly double the decline of the Nasdaq 100, dropping its market value to around $350 billion from more than $1 trillion at its peak last year.

Technical table of the day

Thursday’s meteoric rebound aside, it hasn’t been a good year for tech stocks, with the Nasdaq 100 finishing at least 1% lower in about a third of trading sessions. That puts the tech gauge on track for the most days with at least a 1% decline since 2002. The Nasdaq 100 rose 1% on Friday.

© 2022 Bloomberg L.P.