Meta Platforms (META 0.90%), the company behind Facebook, WhatsApp, and Instagram, has been one of the hottest stocks to own in 2023. The stock is trading up over 155% so far this year, and it has nearly made up for its horrible performance in 2022 when its share price crashed by 64%.

Can this hot stock continue to rise higher, or is Meta Platforms due for some further correction?

Analysts think Meta Platforms may be near a peak

The consensus analyst price target for Meta Platforms is just under $320. That's about 4.3% higher than where the stock currently trades. This is even as many brokerages upgraded their guidance for the social media company in recent months.

But it's important to note that price targets can quickly change and are normally set for where analysts expect the stock to go over the next 12 to 18 months. A good or bad earnings report can quickly change expectations.

Meta's problems haven't gone away

A couple of big reasons Meta Platforms struggled last year were its slowing growth rate and the company's massive spending on Reality Labs, the division that focuses on the metaverse. This year, investors appear to have forgotten about those issues and instead have been bullish on tech stocks due to the emergence and growing popularity of artificial intelligence (AI). According to a report from The Wall Street Journal, Meta is working on an AI system that could be ready next year and that may rival ChatGPT.

But whether that will be enough of a catalyst to lift its lackluster growth rate is a big question mark. 

META Revenue (Quarterly YoY Growth) Chart

META Revenue (Quarterly YoY Growth) data by YCharts

Although Meta's growth rate has been picking up of late, it's too early to tell if it's a real turnaround or if advertisers have simply been moving away from TikTok (due to government crackdowns and restrictions) and X (formerly Twitter) due to changes in its policies. Meta said that during the second quarter, the average price per ad declined by 16% but that there was a 34% increase in ad impressions -- this is the number of times one of its social media users saw an ad. Advertisers may simply be buying more ads because they're cheaper. A drop in the price per ad isn't good news for margins, especially since the ad business needs to make up for losses in the Reality Labs segment.

Reality Labs incurred operating losses totaling $7.7 billion through just the first six months of the year -- that's up from $5.8 billion a year ago. And the company still expects losses from that segment to "increase meaningfully" in the future. By comparison, the company's core business, its Family of Apps segment, reported $24.4 billion in earnings thus far in 2023, up from $22.6 billion this time last year.

If Meta's overall earnings decline, that could make an already expensive stock look even pricier.

Meta Platforms is no longer a cheap buy

At the end of last year, Meta Platforms looked like a bargain buy that investors simply refused to add to their portfolios. This year, like a light switch, things flipped and the stock accelerated at a rapid pace -- so much so that it's not a cheap investment anymore. At more than 35 times its trailing earnings, this is about as high of a premium as investors have been paying for the tech stock in the past five years:

META PE Ratio Chart

META PE Ratio data by YCharts

For a stock trading at an earnings multiple of 35, investors expect some strong earnings growth from the business, and I'm not sure there is a reason to be so bullish on Meta Platforms. The economy is still on shaky ground and a recession may end up happening in the next year. If it does, there could be more of a slowdown in Meta's ad business.

Investors should avoid Meta Platforms' stock

Meta Platforms has been a volatile stock to own over the past couple of years and if the company isn't able to deliver some strong quarters in the near future, the stock could be headed right back down. The company's fundamentals aren't that great and if Reality Labs' losses accelerate at a faster rate than Meta's core ad business, that could result in disaster for the stock. Although this has been a top-performing investment this year, I wouldn't count on Meta Platforms stock to rise a whole lot higher than where it is now.