What happened

Shares of Meta Platforms (META -0.28%) slipped on Monday, falling as much as 5.2%. By the end of the day, the stock was still down 4.7%.

The catalyst that sent the social media titan lower was a bit of negative analyst commentary that painted a fairly bleak picture.

So what

Needham analyst Laura Martin downgraded Meta Platforms to underperform (sell) from hold, according to The Fly. What's notable about the bearish opinion is that there isn't anything particularly new driving the downgrade. Martin named the company's deteriorating fundamentals as a short-term issue. The analyst went further, citing several structural risks for Meta, including "consumer behavior shifts, competition, moat degradation, regulatory risks, and Metaverse investment risks." 

More interesting perhaps, is that the analyst is concerned that Meta Platforms revealed its plans to invest heavily in the metaverse just as it was showing weakness in its core social media business. In a research note, Martin cited the company's slowing revenue growth as a cause for concern, suggesting now might not be the best time for additional spending.

Now what

This pronouncement by Martin seems a day late and a dollar short. Meta signaled that it was going all in on the metaverse in October 2021, with the company's much ballyhooed name change from Facebook to Meta Platforms. At the time, CEO Mark Zuckerberg said, "From now on we are going to be metaverse first, not Facebook." He went on to lay out the opportunity, calling the metaverse "the next evolution of social connection ... [where] you'll be able to socialize, learn, collaborate, and play in ways that go beyond what's possible today." 

Meta revealed that it spent more than $10 billion on Facebook Reality Labs last year, its segment dedicated to all things metaverse. 

In the first quarter, Meta revealed that its revenue grew just 7% year over year, as economic uncertainty and consumer privacy initiatives took a toll on its digital advertising revenue. This isn't surprising since the marketing budget is among the first line items on the income statement to be slashed in the event of a downturn.

Beyond the economic uncertainty, Meta continues to show strong and growing free cash flow -- up more than 9% year over year -- which should help allay any fears resulting from short-term macroeconomic conditions.