Goal it is the best performer in the S&P 500 Index since the stock’s recent low in November, up 54%. The rebound was fueled in part by the social media company’s announcement that it would cut more than 11,000 jobs, the first major round of layoffs in the company’s history.
However, signs of skepticism abound: even after the rally, Goal is selling for less than half its average price-earnings multiple for the past decade and is one of the cheapest stocks in the Nasdaq 100 Index. Its shares are still 64% below its 2021 record and analysts in average expect the stock to advance just 7.7% over the next 12 months.
The problem, from the bears’ perspective, is that Meta’s expensive bet on the metaverse, an immersive virtual world, isn’t going away anytime soon, accounting for a fifth of all costs this year. And his once lucrative ad business is stalling due to privacy policy changes from Apple Inc.which make it more difficult to target consumers with ads on their devices.
The metaverse will maintain the expenses of the companyrelatively high“, said louise dudleyglobal equity portfolio manager at Federated Hermes. “There is a lot of execution risk in Meta.”
Meta outperforms FAANG peers from November low
For the rally to go further, it is possible that Goal need to offer investors more clarity on a few things, including its strategy for dealing with competition from social media rivals like TikTok.
Perhaps most importantly, investors will want to see how much of Apple’s privacy policy change continues to generate ad revenue. In February, Meta estimated that the measure of Manzana would cause a $10 billion hit to revenue for the year.
Some Meta bulls are hopeful that CEO, mark zuckerbergfurther reduce or give up entirely on your ambitions and spending for the metaverse. His hand may be forced by the looming economic slowdown, which is holding back sales at tech companies.
Proof will come on February 1 when Meta reports fourth quarter results. Analysts have cut their average expectations for adjusted earnings per share by 27% and revenue by 15% in the past six months, according to Bloomberg data.
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Meta shares rebound 54% but remain on shaky ground