When Meta Platforms (META) bottomed at $88.09, investors bet that the company could turn itself around from there. The stock traded at a price-to-earnings ratio of below 10 times. Is the stock cheap enough to bet on a 2023 turnaround for an ailing social networking giant?
Meta is an advertising platform. Advertisers are cutting their spending budget because the economy is getting worse. In addition, Apple (AAPL) cut off Meta’s user tracking. This strengthened Apple’s advertising tracking and weakened Meta. Advertisers have no choice but to slash their spending on Facebook and Instagram.
Meta must pivot WhatsApp from a fully free messaging app to an advertising-supported model. This could fail. Users may switch to Telegram or Signal for advertising-free messaging. Furthermore, Twitter, which Tesla (TSLA) CEO Elon Musk owns, is rebuilding its direct messaging. Musk spoke to Signal’s founder to discuss building end-to-end encryption.
Metaverse Cash Burn
CEO Mark Zuckerberg is adamant about building the metaverse. The virtual reality world is ahead of its time. However, it is burning billions in cash that Meta does not have. The company did not cut resources in Meta, which will compound losses.
In 2023, advertisers will reset their budget to the downside. Meta’s revenue slowdown could worsen next year.
