The shares of Menlo Park, Calif.-based social media giant Meta Platforms, Inc. (FB), which was previously known as Facebook, have been experiencing a massive sell-off since the beginning of the year. The stock has declined 29.9% in price over the past month and 38.3% over the past three months.

The former sixth-largest company in the world, with a market value exceeding $1 trillion, has been pushed out of the top 10 of the largest global companies by market value. Closing its last session at $210.48, the stock is down 45.2% in price from its 52-week high of $384.33.

While FB’s monthly active users had grown 4% to 2.91 billion as of December 31, 2021, the company has been facing intense regulatory scrutiny in recent years. Furthermore, amid tensions escalating between Russia and Ukraine, Russia partially limited access to Facebook last week after the company ignored its demands to lift restrictions on Russian media outlets on its platform. This could further put downward pressure on the stock price.

Here’s what could influence FB’s performance in the coming months:

Regulatory Challenges

The social media giant is battling with the Federal Trade Commission over an antitrust lawsuit that alleges FB used its acquisitions of Instagram and WhatsApp to maintain monopoly power. Also, in January, a U.S. judge rejected the technology company’s bid to dismiss the government’s lawsuit and allowed FTC to proceed with the case.

In addition, with the U.S. introducing new bills designed to target the Big Tech giants, the company could face additional hurdles in the coming months. Also, the Platform Competition and Opportunity Act., introduced by Rep. Hakeem Jeffries, could make it difficult for the social media company to acquire young potential rivals in the future.

AI and Digital Voice Assistant Projects Could Boost Metaverse

In an interview, FB CEO Mark Zuckerberg recently stated that the social media giant was working on generative AI models to allow people to generate worlds through speech, have natural conversations with voice assistants, and translate between languages. The company is testing its AI voice assistant on Portal devices and is calling the effort “Project CAIRaoke.” Zuckerberg added that Meta is building the assistant to prepare for the so-called “metaverse.”

Mixed Growth Prospects

Analysts expect FB’s revenues to increase 19.8% in the current quarter (ending March 2022), 12.5% in 2022, and 17.1% next year. The company’s EPS is expected to rise 17.4% year-over-year to $14.7 next year. However, its EPS is expected to decline 21.8% in the current quarter and 20.5% next quarter.

Faltering Financials

FB’s net income declined 8% year-over-year to $10.29 billion in the fourth quarter, ended Dec. 31, 2021. The company’s EPS stood at $3.67, down 5% from the prior-year period. Also, its income from operations came in at $12.59 billion, representing a 1% decline from its year-ago value. FB’s cash and cash equivalents declined 5.5% year-over-year to $16.60 billion, while its total costs and expenses rose 38% from the prior-year period to $21.09 billion.

POWR Ratings Reflect Uncertainty

FB has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. FB has a C grade for Stability. The stock’s relatively high beta of 1.29 is in sync with this grade.

Furthermore, the company has a D grade for Growth. This justifies the stock’s mixed growth potential. And  it has a D grade for Momentum, which is consistent with its price returns over the past month.

In addition to the grades we’ve highlighted, one can check additional FB ratings for Value, Quality, and Sentiment here. FB is ranked #9 of 74 stocks in the F-rated Internet industry.

Bottom Line

With continuing progress in AI projects to build its metaverse, FB is poised to see growth in its augmented and virtual reality business. However, the social media giant’s shrinking market cap has rattled investor confidence in the stock. Furthermore, the company is still facing fierce scrutiny from regulators and lawmakers. So, we think investors should wait for the company to better navigate these crises before investing in the stock.

How Does Meta Platforms (FB) Stack Up Against its Peers?

While FB has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, Trivago N.V. (TRVG) and Travelzoo (TZOO), which have an A (Strong Buy) rating.

FB shares fell $2.98 (-1.42%) in premarket trading Monday. Year-to-date, FB has declined -37.42%, versus a -7.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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