Is Facebook a good stock to buy now?
Social media companies have gained massive traction in the past decade, driven by the worldwide shift towards digitalization. The largest social-media company globally, Meta Platforms (NASDAQ: FB), formerly known as Facebook, lost 26% in market cap after its Q4 results were announced. But the pullback offers investors an opportunity to buy the dip.
Why did Facebook stock drop today?
Mark Zuckerberg’s social media empire felt the full force of investors’ concerns about its growth prospects. The blame for Meta’s plunge is fourth-quarter financial results, released after the bell Wednesday. Facebook shares fell 25% on Thursday – wiping over $200bn (£147bn) off its value – after the company reported its first-ever drop in daily user numbers. The symbolic loss of about 1 million users, the first in 18 years, contributed to a share price rout in after-hours trading on Wednesday that resumed on Thursday.
The main reason is competition. Mark Zuckerberg says company faces tough competition for attention from rivals such as TikTok. Relatively new social media platforms such as TikTok are slowly taking market share away from market leaders Facebook and Instagram. Facebook’s growth has stalled in the US and Europe but the latest falls came from Africa and Latin America.
“Facebook’s big problem is competition for attention – there are only so many people and so many hours in a day and we’re already close to saturation point,” said Neil Wilson, chief markets analyst for trading platform markets.com
All this has helped destroy billions of dollars in market value and had knock-on effects for other stocks in the social media space.
Is Facebook stock undervalued?
The valuation on Facebook's stock (FB) looks silly cheap with the social media giant's continued digital dominance. As of today (2022-02-04), Meta Platforms's share price is $237.76 and fair value is $350. Based on VAVO’s analysis, the stock is trading at a 32% discount to our fair value estimate. But is Facebook stock a good investment right now?
Should you invest in Facebook?
Meta Platforms enjoys a wide economic moat and is the second-largest digital ad platform in the world, after Alphabet. The Facebook platform itself attracts close to three billion people each month, accounting for more than a third of the global populace.
Additionally, Meta Platforms has allocated vast sums of capital to build the metaverse, a virtual universe where users can exist as digital avatars. It will help the company generate an additional $40 billion in sales in 2024. So, It would be smart to bet into FB stock, one of the cheapest growth stocks right now.
Is it a good time to buy FB stock now?
No investor can predict the future, and historical data only says so much. Determining whether or not Facebook — or any stock, for that matter — is a good buy depends on a number of factors.
While investors don’t have a crystal ball, they still base their trading decisions on what is likely to happen in the future, not what has happened in the past. And the future looks a little murky for Facebook.
