Meta Stock’s Innovative Capabilities Seem to be Severely Reduced

Mock Meta platforms (META) for its name change and management change, if you will, but the company’s stock is getting too cheap to ignore. The social media family of apps could be a cash cow for many years to come. Even if trendier platforms like TikTok are disruptive, it’s a bad idea to underestimate the former FAANG frontman’s ability to tip the scales in his favor.

Shares in Zuckerberg’s empire have never been so cheap, with shares just north of 13 times trailing earnings. This indicates a stock with no growth on the wrong side of secular trends, not a company that could lead the charge towards the next big tech trend.

At these depressed levels, the metaverse and promises of good digital sales are almost free to launch. Of course, investors will have to jump aboard Facebook’s much-hated bandwagon as it seeks to combat declining DAU (Daily Active User) trends caused by changing consumer habits, updates to the privacy-centric operating system and new rivals. Anyway, I remain optimistic.

Meta always innovates like it’s nobody else’s business

Reels, stories, and other video features have proven popular lately. Meta’s Reels product has been a hit with many of its users. As the feds seek to view TikTok in a negative light, it is Reels who may have the most leeway.

Yet it’s not just TikTok that Meta’s app family has to contend with. Video, games, audio, and other forms of engaging entertainment eat away at time that could have been spent browsing Instagram or Facebook.

It is clear that Meta must innovate or run the risk of losing ground to traditional forms of media.

The company must show investors that it can be the force that other companies strive to copy. As anti-trust roadblocks increase, it can be more difficult for Meta to navigate its way through disruptive threats. While Meta has done a great job responding to threats like TikTok with similar offerings of its own, Meta really needs to focus on where the puck is heading next.

Right now, the company sees the metaverse as the new frontier. But could another tech trend arise before the Metaverse is ready to cater to the billions of users?

Maybe. A metaverse where consumers spend billions of dollars on digital goods could be over 10 years away. In the meantime, advanced AI and augmented reality (AR) seem like natural stepping stones.

Thankfully, Meta isn’t neglecting other areas of innovation as part of its metaverse push. Sure, Meta spends a hefty amount of money on metaverse development, but it’s also innovating on the AI ​​and AR fronts.

Meta leverages AI to make its apps more engaging and fight misinformation. Such innovations will help today’s family of applications and could enrich the digital worlds of tomorrow.

Wall Street’s view on Meta

On Wall Street, Meta has a Moderate Buy consensus rating based on 29 buys, seven holds, and two sells assigned over the past three months. The average Meta price target of $262.72 implies an upside potential of 54.8%. Analyst price targets range from a low of $180.00 per share to a high of $466.00 per share.

Layoffs may be coming, but the pace of innovation is unlikely to slow

There’s no doubt that the advertising industry will feel a bit of pressure once the economic downturn hits. Nonetheless, Meta will continue to innovate on the AI ​​and metaverse fronts, even as hiring slows and layoffs occur.

Zuckerberg recently remarked to staff that Facebook would “increase the pressure” to identify underperformers. Even though Facebook is cutting its workforce, don’t count on the company to stifle innovation. He’s still betting big on the metaverse and AI, two areas that warrant a much richer stock premium.

The bottom line is that Meta Stock is too cheap

Meta stocks are too cheap to ignore, with a market cap that’s now under $500 billion. Many Wall Street analysts agree.

The future of virtual reality (VR) technology may be uncertain, but it’s the social media sector that could drive the stock higher, even once the dreaded recession hits.

Disclosure

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Troy McMiller

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