Shares of Meta Platforms (META) have settled into the $150-170 range in recent weeks. Though the metaverse as we know it may arrive sooner than we think, questions linger as to whether Meta will even be a major player once the virtual and augmented worlds of tomorrow arrive.
Indeed, Zuckerberg's ambitious comments about the metaverse and the billions to be made are encouraging. However, the company has more than its fair share of critics, as it loses money on VR hardware and software projects. Currently, Meta is a leader in the headset race, but that could change once Apple (AAPL) unveils its premium mixed-reality headset.
Although Meta is covering bases at the high- and low-end of the VR markets, with Oculus Quest and Pro tiers, we all know Apple could leapfrog over Meta in terms of headset dominance.
If it can repeat the success it had with the iPhone, then Meta's VR ambitions could come crashing down almost as hard as its stock has over the past few months. Nonetheless, I am bullish on META stock because of its low valuation and social-media dominance.
Worth noting, META stock scores a 7 out of 10 Smart Score rating on TipRanks. This is on the high end of the "neutral" rating, indicating that the stock may perform slightly better than the market, going forward.
Meta is a Great Buy, but Not for the MetaverseGiven competitive risks and the firm's tarnished reputation, I'd argue that the days of Meta's VR market dominance could be numbered. It's not just Apple that's joining the VR race. Many other big tech players want a slice of the pie. In any case, it's Apple that poses the greatest risk to Meta as the next frontier of hardware rolls out over the next decade.
Although I'm no fan of Meta's VR strategy and ability to stave off rivals, I do think META stock is a Buy for its robust social-media business.
Zuckerberg recently issued a dire warning about a recession. Ad sales could take a hit, even as user engagement recovers. Still, it's hard to pass up on the stock, with a mere 4x sales and 12.7x trailing earnings multiple. That's cheap, even if Meta finds itself on the receiving end of technological disruption.
Meta is More than Capable of Firing Back at TikTokMeta's Family of Apps business is an intriguing cash cow that may have many years left of growth in the tank. Though Facebook's negative daily active user (DAU) trend signals the beginning of the end, I'd argue that Meta has more than enough tools to engineer another leg of growth, even amid rising competitive pressures from TikTok.
TikTok is an incredibly popular platform among younger consumers. However, it doesn't have a unique product that a deep-pocketed rival like Meta can't replicate or even improve upon. Reels is Meta's answer to TikTok, and thus far, it's been an underwhelming response.
As the company invests heavily in AI-driven algorithms, I think more content will originate on Reels. As I noted in a prior piece, Instagram users are embracing Reels. Over time, the platform will get more content, and the content will likely be better catered to users.
Further, Meta may get a solid boost should the federal government decide to take action to make firms like Apple ban the Chinese-owned TikTok app from its App Store. U.S. communications regulators would love for TikTok to be taken off app stores. However, it may prove difficult to push the tech titans to ban TikTok due to the potential for data spying.
Thus far, Apple has yet to consider removing the app. TikTok noted it has never provided any U.S. data to Chinese regulators.
In due time, though, there's a non-zero possibility that TikTok will go the way of Flappy Bird in America. Such a move would greatly boost Meta and its growing Reels platform.
Even without help from the government, Meta's Reels seems like a worthy competitor that's able to leverage users on its other social-media apps.
Wall Street's Take on META StockTurning to Wall Street, META stock comes in as a Moderate Buy. Out of 38 analyst ratings, there are 29 Buys, eight Holds, and one Sell rating.
The average Meta price target is $269.19, implying upside potential of 57.5%. Analyst price targets range from a low of $180.00 per share to a high of $330.00 per share.
The Bottom Line on Meta PlatformsMeta Platforms is likely a great deal for those seeking solid earnings growth over the long run. Between TikTok and Reels, I'm a bigger fan of Reels, especially as regulators set their sights on TikTok.
If Meta wasn't pouring billions into the metaverse, I'd be an even bigger fan of the stock here. Metaverse NFTs and other digital goods are no longer enough to get investors excited about the stock. They want to see progress on the Family of Apps. In due time, I do think investors will get what they want.
Though I'm unenthused by Meta's VR push, it's hard to deny the power of its Family of Apps, which, I believe, has staying power.
It’s that time again. Wall Street’s quarterly earnings show is getting underway and before the month is out, Apple (AAPL) is expected deliver its fiscal third quarter report (June quarter, scheduled for July 28).
While investor concerns mostly center on the effect of high inflation and iPhone demand, Evercore’s Amit Daryanani believes that despite data points skewing to the negative - these include weak Chinese smartphone data (-9%), App Store growth slowing down to ~4%, and companies such as Micron noting “weakness” in smartphone/PC demand - AAPL has provided a conservative enough guide which will allow for another beat (although possibly a more modest one compared to prior ones) in the June quarter.
The Street is looking for ~1.4% growth, a display Daryanani believes should not be difficult to meet. While Apple did not give revenue guidance for the quarter, the company did suggest the quarter’s growth rate would have mirrored the March quarter (+9%), if not for several headwinds including an FX hit to the tune of 300bps, 150bps from Russia, and $4-$8 billion in supply constraints.
However, the analyst notes that Apple has “tended to overestimate supply headwinds over the past few quarters,” and therefore believes it is possible the supply and FX issues are “less severe than Apple assumed.”
That said, all eyes will be on the September quarter guide and here Daryanani is not quite so confident. Due to the “challenging f/x environment and evolving macro situation,” Daryanani thinks there’s potential for the September quarter guide to “qualitatively be below current expectations.”
As such, while the analyst has made no changes to the June quarter forecast, the September quarter estimates are lowered to revenue/EPS of $88 billion/$1.28, respectively. Both are below Street expectations, which stand at $90.3 billion/$1.32.
“Net/net,” Daryanani summed up, “we are relatively neutral this quarter as we think Apple is contending with numerous headwinds, but these risks should be adequately understood and reflected in expectations.”
To this end, Daryanani maintains an Outperform (i.e., Buy) rating along with a $180 price target. The implication for investors? Upside of 22% from current levels. (To watch Daryanani’s track record, click here)
28 analysts have posted AAPL reviews during the past 3 months, which break down as 22 to 6 in favor of Buys over Holds, and all coalesce to a Strong Buy consensus view. Given the average price target clocks in at $185.05, the shares are expected to appreciate ~26% over the next 12 months. (See Apple stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.