Meta Platforms Stock: Is it a Buy on the Dip?

Meta Platforms, the parent company of social media giants Instagram, WhatsApp, and Facebook, found itself in the spotlight following its recent first-quarter results presentation. Despite surpassing expectations in revenue and earnings, the company faced a sharp decline in its stock value after CEO Mark Zuckerberg unveiled ambitious plans for investments in artificial intelligence (AI).

The stock, listed as META on NASDAQ, experienced a significant downturn, plummeting by 10.56% to $441.38, representing a loss of $52.12 per share. This sharp drop has investors questioning whether this dip presents a buying opportunity amidst the turmoil.

Should You Buy Meta Stock During this Downturn?

While the metaverse struggles to gain traction, there’s already a significant demand for chatbots. Encouraging people to use a free chatbot is likely much simpler than convincing them to don a virtual reality headset.

Meta plans to make substantial investments in potentially unprofitable new products. However, the stock remains an attractive purchase due to the robust profitability of its well-established advertising business, which is poised to offset any incurred losses.

Last year was a generally lousy one for the cyclical advertising industry. Despite a cyclical challenge and metaverse losses, Meta Platforms’ return on assets never fell below 12% in 2023.

One of Meta’s strengths lies in its formidable network effect, which is evident in its vast user base across its suite of applications, which averaged a staggering 3.24 billion daily active users in Q1.

Long-Term Investment

Meta Platforms is going to spend heaps on AI and metaverse initiatives, but it’s returning even more to investors. The company declared a dividend earlier this year that currently offers a 0.5% yield. Plus, it returned $14.6 billion to shareholders in Q1 in the form of share repurchases.

Over the past five years, trailing 12-month earnings per share have surged by an impressive 153%, indicating Meta’s consistent success. Despite this track record, the market’s growth expectations for Meta Platforms are modest. With the stock trading at just 21.6 times forward-looking earnings expectations, seizing the opportunity to acquire shares during this recent dip for long-term holding appears prudent.