META Stock Falls Following Needham Downgrade

  • Analysts at Needham just issued a downgrade of Meta Platforms (META).
  • Moreover, one Needham analyst indicated concern over Meta Platforms’ “deteriorating” fundamentals and expects the company to lower its full-year financial outlook.
  • META stock is down about 4% today as a result of the downgrade and analyst commentary.
META stock - META Stock Falls Following Needham Downgrade

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Social media and metaverse company Meta Platforms (NASDAQ:META) is in the hot seat today. That’s because analysts with Needham have issued a downgrade for META stock. Yet, the troubles run deeper than just the downgrade, as one analyst’s commentary points to serious potential problems for Meta Platforms.

This year, tech businesses like Meta Platforms are already facing pressure from inflation and supply-chain constraints. Plus, the company is attempting to transition into a metaverse market leader. A downgrade is the last thing that Meta Platforms’ shareholders need now.

Yet, that’s exactly what they got. In a report, investment analysts at Needham changed their rating on META stock from “hold” to “underperform.” That’s just the tip of the iceberg, though. Analyst Laura Martin was particularly harsh in her commentary. She recommended that investors should use Meta “as a source of funds.”

Presumably, that’s a fancy way of telling traders to sell their META stock shares now. Moreover, Martin doesn’t seem to maintain a bright multi-year bottom-line outlook for Meta Platforms. “We lower our estimates because we believe cost growth will far exceed revenue growth for the next 2 years,” she wrote.

What’s Happening With META Stock?

Sometimes, the downgrade and commentary of just one analyst firm can have a major impact on a stock’s price movement. Today is a case in point, as Meta Platforms shares were down 4% by 12:00 p.m. Eastern. That’s twice as far down as the Nasdaq, which fell 2%.

It’s up to each investor to decide whether the selloff was justified. There’s no denying, though, that Martin had some scathing fiscal forecasts to accompany her downgrade.

In particular, the analyst expects Meta Platforms to generate $27.7 billion in revenue in 2022’s third quarter. This represents a 6% decline from her previous estimate. It’s also lower than Meta Platforms’ own prediction and the Wall Street consensus estimate of around $29 billion.

On top of all that, Martin envisions Meta Platforms reducing its full-year financial outlook during the company’s earnings call, which is slated to take place this month. The Needham analyst appears to additionally be concerned about Meta Platforms’ costly investment in the metaverse. Hence, traders will need to mull over these potential issues and decide whether META stock is a bargain or an asset to be liquidated today.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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