Throughout its life as a publicly traded firm, Facebook parent Meta Platforms Inc. has repeatedly demonstrated an ability to rebound after earnings disappointments or various controversies have weighed on the stocks.Not this time. Shares of this big tech firm is declining.
Since May 2020, the shares are coming off their lowest close, and are down more than 45% from a September peak, a turn down that’s unmatched among big U.S. tech stocks in recent years. The slump has pushed Meta out of the top 10 of largest worldwide companies by market value, yet also left it dealing at its cheapest on record.
The stock has seen a drumbeat of awful news, including Google’s statement this week that it would bring a privacy plan to Android phones. While the company said the move is ad-friendly, it’s reminiscent of Apple Inc.’s changed privacy policy, which dented digital advertising and was a factor behind Meta’s disastrous earnings report this month. The results called spurred the biggest selloff in Wall Street history in terms of value erased and its increase prospects into doubt.
David Wagner, portfolio manager at Aptus Capital Advisors said “The management team needs to show investors over the next few quarters a path to growth,” He added that the stock, which he owns, is “in purgatory,” and that sentiment “couldn’t be lower.”
Woes of Meta’s growth stand in stark contrast to other technology behemoths, which reported strong results this time, helping limit declines in their stocks in the middle of mostly negative start to 2022.
Investors have long been quick to acquire big tech on weakness, as they bet that the group will continue to see robust growth. As a result, declines of the magnitude that Meta has seen haven’t happened in the era of trillion-dollar market caps for the companies.
Since 2013, Apple hasn’t had a 40% drawdown, according to data gathered by Bloomberg. For Amazon.com Inc., Microsoft Corp., or Alphabet Inc., the last time they had a peak-to-trough drop of this scale was around the financial crisis.
Bill Stone said, Meta “is the company people love to hate, and Alphabet is an easy alternative if you want exposure to online advertising,” chief investment officer at the Glenview Trust Co. “You don’t get tough questions from clients for owning Alphabet, which is doing well and not nearly so hairy as a company.”
The weakness in Meta’s stock has made it attractive in terms of traditional valuation metrics. The stock’s forward price-to-earnings ratio is under 14, its lowest on record, and well below its five-year average of 20.9. The forward price-to-sales ratio is about 4.2, also a record low. Meta is trading at its biggest-ever discount to the Nasdaq 100 Index.
In part because of the valuation, Meta continues to have fans on Wall Street. Nearly three-fourths of the analysts who cover the stock recommend buying it, according to data compiled by Bloomberg, while the average analyst price target points to upside of more than 60%.
Glenview’s Stone, who owns the stock, is among those betting on a rebound, though he admits a turnaround may be a long-term process.
“How cheap it is right now outweighs all the issues facing it,” he said in an interview. “If it can grow anywhere near where it was growing before, then it’s a steal. It will be too cheap to resist.”
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