The last month has seen 33% shaved off the Meta (NASDAQ: FB) share price. This comes on the back of investors reacting negatively to the recently released fourth-quarter results, as the stock logged the biggest one-day market capitalisation loss in history ($230bn). The firm also suggested that growth could slow going forward.
So, clearly, these results left Meta investors feeling gloomy, but I think this dip in share price could be an opportunity for me to add the stock to my portfolio. Let’s take a look at why.
Meta concerns
While I see value in the current Meta share price, I do have some concerns. One of these is the potential decline in popularity that Facebook, a site owned by Meta, may be experiencing. The latest results showed a drop-off in daily active users, the first time in the firm’s history. And this is more than likely a result of the rise of competitor sites such as TikTok. This may be a reason for Meta’s weak forecast for future growth.
Also, and as mentioned by my fellow Fool Edward Sheldon, another issue for the company is the recent changes to Apple’s privacy policy. Impacting Meta’s ability to offer targeted advertising, it is believed this will cost the firm around $10bn in advertising revenue. This will clearly be a problem for it going forward.
Why I’m buying
With that said, I retain a bullish outlook. After the recent fall in the Meta share price, the firm’s price-to-earnings (P/E) ratio is now around 16. By comparison, Apple has a P/E of 28, while Alphabet’s is 24. For a big tech stock that’s a low valuation, and a tempting factor for me when considering whether to buy the shares.
Further, while Facebook saw a decrease in the number of its daily active users, across its entire ‘Family of Apps’ (also including Instagram, and WhatsApp) Meta actually saw a small increase, meaning Facebook’s decline could be offset across the business.
I also like the fact the firm is investing in the metaverse. This is an area I have a bullish outlook on. While its expansion into this area has been costly, Bloomberg predicts this space could be worth $800bn in 2024. Granted, it will face competition from game systems and virtual worlds such as Roblox and Decentraland, but I think the firm’s early investment in the space could pay dividends.
So, while the latest earnings report may not have met expectations, I see a solid opportunity in this share price fall. Overall user numbers remain healthy and I like the — albeit costly — moves the firm is making to plan for the future. Should Meta be able to capitalise effectively on the metaverse, I think we will see this play out positively in times ahead. At the current share price, I would look to add it to my portfolio.
Charlie Keough has no position in any of the shares mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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