The week didn’t start well for Meta Platforms, the parent company of Facebook and Instagram. After Needham’s analyst Laura Martin downgraded Meta stock to “sell” in a recent note to clients, the company’s shares plunged 4.68%.
Meta stock saw a gradual growth last week and closed at $170.88 per share on Friday. However, Martin’s note quickly erased all that, and the stock closed at $162.88 on Monday.
Martin recommended the clients to steer away from the Meta stock and treat it as a “source of funds.” Her reasoning is that the company is seeing slower growth at the same time it started a huge project of building its “Metaverse.” She is also predicting that Meta’s costs will “far exceed” any revenue growth in the future.
“We recommend investors remain on the sidelines while they assess several structural valuation risks, including consumer behavior shifts, competition, moat degradation, regulatory risks, and Metaverse investment risks,” Martin added.
The focus on Metaverse has cost Meta a huge amount of money in recent years. It is estimated that the company’s Reality Labs division, which focuses on virtual reality experiences, has seen close to $3 billion in losses in the first quarter of 2022 alone. The estimated revenue, on the other hand, was $695 million.