Meta Platforms Inc. META shares slumped about 7% on Tuesday amid reports of a regulatory setback in Europe. Undeterred by the sell-off, Empirical Financial’s Whitney Tilson threw his weight behind the company and the stock.
What Happened: Meta is facing at least eight headwinds and these have impacted the company and the stock price, Tilson said in his daily newsletter.
These include Apple Inc.’s AAPL privacy measures, competition from TikTok, end of the pandemic, stronger dollar, metaverse spending, artificial intelligence spending to address challenges posed by Apple and TikTok, Reels cannibalizing more profitable segments of Facebook and Instagram platform and weak consumer spending in sectors Meta has ad exposure to, he added.
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Meta’s Mark Zuckerberg should send Elon Musk a truly “over-the-top” holiday present, probably a massive yacht, Tilson said. This is for creating such chaos and drama at Twitter that regulators, media and investors are distracted from the chaos and drama at Meta, he added.
Despite this inclement backdrop, Meta still managed to report a 20% operating margin and $4.4 billion in net income in the third quarter, the analyst said.
Headwinds Can’t Get Worse: Tilson said Meta’s headwinds aren’t likely to worsen, with some of them likely to turn into tailwinds. Meta’s AI investment might help ad targeting, which, in turn, could help Reels perform better than TikTok, he said.
The year-over-year comparisons for Meta could turn from dreadful over the year to, at the very least, stable, the analyst said. He sees a good chance of improvement.
“My long experience is that when beaten-down stocks of exceptional businesses turn around, they don’t just pop 20% — rather, it’s usually 50% to 100% in a matter of months,” Tilson said.
Meta, therefore, remains a strong buy, he added.
Price Action: Meta stock has shed about 66% for the year-to-date. On Tuesday, it settled 6.79% lower, at $114.12, according to Benzinga Pro data.
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