The Meta Platforms (NASDAQ: FB) share price fell off a cliff yesterday. That came as a less-than-encouraging quarterly report alarmed already-battered tech investors. Revenue in Q1 is expected to be somewhere between $27bn and $29bn, rather than the $30bn expected by analysts. The number of active users also declined, a first in the company’s 18-year history.
Should I be using this weakness as an opportunity to load up on the owner of Facebook, WhatsApp and Instagram? Like the relationship status on some of its users’ home pages, “it’s complicated“.
Meta share price: is the reaction overdone?
In certain respects, I think the reaction is too extreme. A fall from 1.93bn to 1.929bn active users in the last three months of 2021 is nothing to worry about, I feel. But the market reaction suggests Facebook’s growth is history. That strikes me as somewhat ludicrous.
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In reality, I expect the company will adapt and overcome, as any good business does. Meta owns a staggering amount of data and information on users that it can then sell to advertisers. It also remains a hugely profitable business.
Like him or not, founder Mark Zuckerberg isn’t going anywhere either. At just 37, this isn’t the first challenging period faced by Meta’s chief and it won’t be the last. For me, the Cambridge Analytica scandal in 2018 was far more concerning. Even the best stocks miss earnings targets now and then.
Reasons to be fearful
This isn’t to say the company doesn’t face substantial challenges going forward. Some or all of these could put further pressure on the Meta share price.
The popularity of rival apps such as TikTok and Alphabet-owned YouTube will certainly be playing on owners’ minds. The introduction of the App Tracking Transparency Policy by fellow tech titan Apple is another potentially huge headwind. Yes, the so-called metaverse being created by the company could be the solution to both problems. But this will take time to develop and cost billions of dollars in the process.
And if all of this weren’t enough, there’s the much-discussed rotation into value stocks in 2022. Investors become rattled over the prospect of quicker-than-expected interest rate hikes are leading this. Meta may get back on track in the next quarter. But wider market sentiment could still delay a recovery. The mere whiff of increased regulation won’t help.
I’m a buyer (sort of)
On balance, I’m inclined to think Thursday’s movement in the Meta share price was another example of stock market myopia. A good company doesn’t become a bad one in three months. Being able to look further ahead than a few weeks is one of the few, very powerful, advantages I have over professional investors whose careers are on the line.
I’m perfectly content to increase my exposure to the company via quality-focused funds such as Fundsmith Equity and LF Blue Whale Growth rather than buy the stock directly. This strategy may reduce my gains in the event of Meta making a strong recovery. But it’s much easier than trying to time my entry when growth stocks are being hammered across the board.
