Shares of Facebook parent Meta Platforms (META 0.73%) rose to nearly $180 on Monday. Believe it or not, this represents almost a 50% gain year to date. Shares are on an absolute tear.
With the tech stock rising so sharply and so quickly, it's a good time to take a look at Meta shares to see whether they are a buy, sell, or hold today. After all, not only has the stock soared, but the social media giant also recently reported its fourth-quarter results, giving investors more data to consider.
A sharp rebound
The most obvious explanation for Meta stock's big gain this year is simply that shares are rebounding sharply from a big sell-off in 2022. The stock cratered last year, declining 65%. Indeed, shares have been hit so hard that -- despite the stock's recent big gain -- it is still trading 24% below its 52-week high and more than 50% below its all-time high closing price of $382.18 in late 2021.
Combining this info with the fact that Meta's price-to-earnings ratio actually dipped below 10 in late 2022, a good case can be made for the stock's recent rebound being primarily due to shares bouncing back from oversold levels. While Meta has certainly been weathering some challenges, shares were due for at least a partial rebound after such an intense beating.
But there's more behind the stock's recent gain. Investors have also seemed to appreciate the company's commentary on expense management in the company's recent fourth-quarter update.
"[O]ur management theme for 2023 is the 'Year of Efficiency' and we're focused on becoming a stronger and more nimble organization," said Meta founder and CEO Mark Zuckerberg in the company's fourth-quarter earnings release. To this end, Meta lowered its outlook for 2023 expenses from a previous forecast of $94 billion to $100 billion to between $89 billion and $95 billion.
Is Meta stock still attractive?
While Meta stock may have deserved its recent rebound, the game has changed for investors interested in the stock. Shares are much pricier than they were earlier this year. The current price-to-earnings ratio sits at 22 even as Meta's revenue is moving in the wrong direction. Revenue fell 1% year over year in Q4 and the midpoint of management's guidance for first-quarter revenue calls for approximately a 2% decline.
Sure, management implies in its recent earnings calls that some of Meta's revenue headwinds could subside later this year. Namely, the company is working to rebuild its advertising measurement and tracking tools to offset some challenges associated with ad tracking and measurement on Apple's mobile operating system. Additionally, the company's monetization in its TikTok-like Reels format across its social networking apps is finally maturing and will likely contribute more meaningfully to financials in the coming quarters.
But management emphasized in the company's most recent earnings call that the uncertain macroeconomic environment remains, making it difficult to predict when a meaningful return to growth might occur.
While Meta's aggressive expense management is good news for shareholders, it's not enough to call this stock a buy at this valuation. For this reason, it may be wise to do nothing. Shareholders may want to consider holding, and investors on the sidelines may want to stay there. Put simply: More information is needed to assess how well Meta can come out of its current challenges. This is particularly the case now that the stock has a much higher valuation than just a few months ago.
