Shares of Meta Platforms (NASDAQ:META) nosedived after earnings last week, falling to levels it hasn’t been at since early February. Revenue for the first three months of 2024 was up 27% to $36.5 billion. The ad business continues to look strong for Meta as ad impressions rose by 20% and the average price per ad also increased by 6%.
But despite posting strong earnings numbers, investors appear to be concerned about the company’s costly investments into artificial intelligence and the metaverse; in the most recent quarter, the company incurred a $3.8 billion operating loss on its reality labs division.
By continuing to spend and lose money on the metaverse, pay a dividend, and also spend money on investments into AI, it could be a bumpy road ahead for Meta Platforms as it plans to deploy cash into all these areas.
The good news is that the company’s core business, its Family of Apps segment, which includes Facebook, Instagram, WhatsApp, and Messenger, generated an operating profit of $17.7 billion, up from a profit of $11.2 billion in the prior-year period. The company’s headcount is down 10% from a year ago as Meta has reduced staff in an effort to focus more on efficiency.
Trading at a forward price-to-earnings multiple of 22 and a PEG ratio of 1, Meta could make for an enticing long-term play, especially with the potential for a TikTok ban in the U.S. to effectively remove a major competitor for the company. For long-term investors, now may be a good time to pick up shares of the social media stock.
