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Meta Platforms (NASDAQ:META) Is under Peer Pressure
Stock Analysis & Ideas

Meta Platforms (NASDAQ:META) Is under Peer Pressure

Story Highlights

Competitive headwinds are taking their toll on Meta stock and the social media giant could take a long time to get to TikTok.

Social media and internet giant Meta Platforms (NASDAQ:META) is in troubled waters for various reasons. One prominent factor is competition from its peers. As short-form videos took over social media, Meta faced a bigger rival, TikTok. Besides TikTok, Alphabet’s (NASDAQ:GOOGL) (NASDAQ:GOOG) YouTube Shorts is also emerging as a formidable competitor. Growing competition and TikTok’s large scale will likely hurt Meta’s prospects and, in turn, its stock price. 

Meta Facing the Heat

Amid competition, Meta is transitioning its services toward short-form videos like Reels. Further, it witnessed strong Reels (short-form video) growth across Facebook and Instagram in the last reported quarter. However, a recent Wall Street Journal report indicated that it would take a while for Meta to engage more users to reach TikTok’s level. 

Citing the company’s internal research data, the Wall Street Journal report highlighted that Meta’s Reels engagement is declining. The data also pointed out that the time Instagram users spend on its platform daily is significantly lower than the time spent on TikTok.

Meanwhile, during its Q2 conference call, Alphabet announced that YouTube Shorts were being watched by over 1.5 billion signed-in users every month. Moreover, it has more than 30 billion daily views. 

Given the competitive headwinds and ongoing challenges related to Apple’s (NASDAQ:AAPL) new privacy guidelines, regulatory concerns, and weak ad spending, Meta stock has lost about 50% of its value this year alone. With the significant decline in its stock price, the obvious question is whether Meta stock is a good investment at current levels.

Is It a Good Time to Invest in Meta?

The overall selling in technology stocks, including Meta, has led to a compression in its valuation. However, the Street is cautious but optimistic about Meta’s prospects. 

On TipRanks, Meta stock has a Moderate Buy consensus rating, which is based on 27 Buys, five Holds, and two Sells. Further, META’s average price target of $223.70 implies 32.4% upside potential. 

While analysts are cautiously optimistic, hedge funds have bought the dip in Meta stock (acquiring 4.5M Meta stock last quarter). Overall, Meta stock has a Neutral Smart Score of seven out of 10 on TipRanks, implying that its performance could be in line with market expectations.

Bottom Line 

Competitive headwinds and ad pressures tied to the macro weakness could continue to impact Meta’s financials in the coming quarters. Further, regulatory challenges and difficulty in growing its user base will remain a drag. However, the negative impact on Meta’s revenues due to Apple’s privacy changes is expected to ease in the quarters ahead. 

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