(Bloomberg) -- Mark Zuckerberg isn’t winning many converts on Wall Street to his vision of his social-media company as a play on immersive digital experiences.
The stock of Meta Platforms Inc. is roughly flat since October, when company changed its name from Facebook Inc. and the chief executive officer laid out plans to transform it into a “metaverse-first” business. It’s the cheapest of the megacap technology stocks, trading at a 20% discount to the Nasdaq 100 Index.
Investors will be keen to learn more when Meta reports fourth-quarter earnings after the market closes Wednesday about the social media giant’s progress on “the next frontier,” in part because Zuckerberg has said the initiative would be a $10 billion drag on operating profit in 2021. Any lead on that could determine the path for its beaten-down share price.
“Investors are going to require more visibility into what they are underwriting for management’s desired next leg of growth,” Brad Erickson, an analyst at RBC Capital Markets, wrote in a research note Monday.
The shift to the metaverse -- digital worlds where users can socialize, play games and conduct business -- came right in the middle of public scrutiny about the effect on society of the company’s Facebook and Instagram platforms. That scrutiny has been a major overhang on its stock price.
Analysts predict Meta will deliver a slight dip in fourth-quarter earnings and show 19% revenue growth, according to the average of estimates compiled by Bloomberg. The company is expected to break out results for Reality Labs, under which the metaverse bets sit.
Wall Street “will want to know how big the profit headwind could get in future years,” analyst Justin Post of Bank of America Corp. wrote in a note previewing results last week.
Meta shares climbed 3.4% in U.S. premarket trading amid a broad rally in tech stocks after blowout results from Alphabet Inc. Morgan Stanley said Google’s better-than-estimated ad revenue has positive implications for the sector, which has been facing re-opening blues.
Matt Peron, director of research at Janus Henderson, says Meta’s relatively cheap valuation is “undemanding” and one of the reasons he likes the stock going into earnings. The company is valued at less than 21 times estimated earnings for the next year, versus just under 26 for the Nasdaq 100.
“Everything got sold down last month, including the names with strong fundamentals, but I suspect the earnings could come out and remind people just how strong the fundamentals are,” he said in an interview.
Tech Chart of the Day
Tesla Inc.’s massive stock market value, its addition to the S&P 500 and its cult status with investors haven’t been enough to damp the extreme volaility in the shares. The stock has already had three 10% moves this year.
Top Tech Stories
- PayPal shares plummeted after the payments company said growth in spending on its platform continued to slow during the fourth quarter as economies around the world reopened
- Sony reported strong third-quarter earnings and raised its fiscal-year forecast on Wednesday, propelled by a hit Spider Man movie and sales of image sensors used in Apple’s iPhones
- Alphabet plans a 20-for-1 stock split so prospective buyers won’t need upwards of $3,000 to own a share
- Advanced Micro Devices rallied 12% in premarket trading after giving a surprisingly strong sales forecast, suggesting it’s making further gains on archrival Intel in computer processors
- Intuit CEO warned that Americans who invested in speculative assets like Bitcoin or nonfungible tokens or actively traded equities on commission-free websites could be dumbfounded at this year’s tax bill
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
