After shedding greater than half its worth final 12 months, Meta Platforms (META -1.20%) inventory has been on hearth in 2023, with shares up roughly 51%. Whereas that is nothing to sneeze at, that is simply the tip of the iceberg in comparison with its long-term efficiency. In reality, since its debut as Fb simply over a decade in the past, Meta Platforms has gained roughly 375% — even after the inventory’s latest shellacking. 

This leaves traders in a predicament. Given its vital positive aspects over the previous 10 years, would-be traders are left questioning in the event that they’ve already missed the boat on Meta Platforms. Let’s take a step again to see if the inventory continues to be a purchase.

Picture supply: Meta Platforms.

It is the economic system

The financial headwinds that started in late 2021 have little doubt hampered the corporate’s progress, as Meta Platforms will get almost all its income from the digital promoting that seems on its platform. Historical past exhibits the promoting funds is among the many first to be slashed in instances of financial uncertainty. Meta Platforms is the world’s second-largest digital advertiser, with roughly 20% of the market, in keeping with business publication Digiday.

The downturn and the well-documented decline in advert spending have hit Meta Platforms laborious, however this darkish cloud has a silver lining. As soon as the economic system regains its footing, the digital promoting spigot will reopen, and the advert {dollars} will movement as soon as once more, enriching Meta Platforms within the course of.

A detour by way of the metaverse

With all deference to CEO Mark Zuckerberg, his latest give attention to the metaverse turned heads. Over the previous two years, Meta Platforms has spent almost $24 billion to deliver this imaginative and prescient to life. Not everybody believes this was a worthwhile funding. That mentioned, the identical applied sciences that targeted on this digital area produce other — doubtlessly profitable — purposes.

It is no secret that Meta Platforms has a protracted historical past of creating synthetic intelligence (AI) to acknowledge people in photographs and suggest content material for customers of its social media platforms. By the identical token, the corporate has used its algorithms to parse knowledge and direct its promoting efforts.

Let’s not overlook the event of digital actuality (VR) and augmented actuality (AR) that has many extra purposes than an all-encompassing metaverse — with use instances in healthcare, training, and leisure, amongst others. Meta Platforms will little doubt discover different methods to capitalize on the cash it spent to deliver the metaverse to life.

The latest buzz surrounding ChatGPT and different chatbots exhibits that there is nonetheless loads of runway forward for AI-infused applied sciences — an space wherein Meta Platforms is well-versed.

A little bit of perspective

“Previous efficiency isn’t any assure of future outcomes,” or so the previous saying goes. It does, nonetheless, assist present obligatory context. The current downturn however, Meta Platforms has a historical past of market-beating progress. For instance, as just lately as 2021, Meta Platforms grew income by 37% and earnings per share by 36%. This illustrates that its present trials are born of the financial local weather.

Within the face of those headwinds, the corporate battened down the hatches, shedding 11,000 folks, or 13% of its workforce, whereas slicing different prices to shore up its monetary place. Current experiences recommend one other spherical of layoffs is within the making, with hundreds of further workers cuts on the desk. 

One other issue that bears consideration is Meta’s unequalled attain and the corresponding community impact. At newest rely, 3.74 billion folks log into certainly one of Meta’s social media platforms each month, with 2.96 billion checking in day by day. Advertisers will go the place the eyeballs are, and there is no denying Meta’s credentials in that respect. 

Taken as a complete, the state of affairs suggests that when the economic system finds its footing — which it little doubt will — the brand new, leaner Meta Platforms is poised to come back roaring again.

Do not take my phrase for it. UBS named Meta Platforms as a “High Choose,” citing the corporate as its “favourite title” within the web house. The agency sees room for greater earnings, pushed by the aforementioned price reductions and bettering income progress. The agency believes the inventory may even profit from each estimate revisions and a number of expansions because the economic system improves. Current knowledge factors improve the chance that the agency’s bull case will play out, pushing Meta Platforms shares as excessive as $331. This could signify potential positive aspects for traders of 82% in comparison with Thursday’s closing value. 

You get what you pay for

The downturn has pushed Meta’s valuation to historic lows, but it surely nonetheless is just not what some traders would name “low-cost,” significantly by way of conventional valuation metrics. The inventory is presently promoting for 4 instances subsequent 12 months’s anticipated gross sales when most consultants agree an affordable price-to-sales ratio is between 1 and a couple of. That mentioned, given the corporate’s spectacular historical past and a number of competing progress drivers, I’d recommend that Meta inventory is a worth at this value.

I am not simply saying that, both. I purchased extra shares of Meta Platforms inventory simply final week.