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Why Is Meta Platforms (META) Stock Trending Today?

  • Shares of Meta Platforms (META) opened weakly before gaining slightly in the early afternoon.
  • Digital advertising pressures contributed to an analyst downgrade.
  • A key shareholder also criticized META stock for the underlying metaverse exposure.
META stock - Why Is Meta Platforms (META) Stock Trending Today?

Source: Chinnapong / Shutterstock.com

Once an enterprise that could seemingly do no wrong, social media giant and technology innovator Meta Platforms (NASDAQ:META) now finds itself struggling for traction. Throughout this year, the company incurred myriad challenges, including posting its first-ever quarterly drop in revenue. Seemingly, META stock can’t catch a break, gapping down on Monday before squeaking out a minor gain.

Moving forward, the underlying firm faces major hurdles it must overcome. Below are three headwinds that are applying significant pressure against META stock.

Meta Platforms Suffers an Analyst Downgrade

On Monday, BofA Securities analyst Justin Post downgraded META stock to “neutral” from “buy.” Additionally, Post cut his 2-month price target on the stock to $150 from $196, according to a Barron’s report. Significantly, the analyst mentioned that “added uncertainty on 2023” makes him cautious about Meta Platforms’ forward prospects.

Primarily, Post targeted digital advertising concerns as a future headwind for META stock. Although he expects third-quarter advertising to be in line with consensus estimates, “we expect advertiser budget cuts in early 2023 to weigh on sentiment and drive added uncertainty on post-IDFA changes and Reels transition.”

IDFA stands for “identifier for advertisers,” an Apple (NASDAQ:AAPL)-based protocol to precisely target and track users. Apple made changes to the protocol, making it an opt-in feature.

Reels references an Instagram feature that mimics Snap (NYSE:SNAP). However, with Snapchat content consumption fading, META stock naturally incurs anxieties about the potentially ineffective pivot.

Major META Stock Shareholder Has Had Enough

Adding insult to injury, Altimeter Capital Chair and CEO Brad Gerstner wrote an open letter to Meta and its CEO Mark Zuckerberg, asserting that the organization has too many employees and is moving too slowly to retain the confidence of investors, according to CNBC.

Per the news agency, the “Meta investor recommends a plan to get the company’s ‘mojo back’ including reducing headcount expenses by 20% and limiting the company’s pricey investments in ‘metaverse’ technology — VR software and hardware — to no more than $5 billion per year.”

It’s not an unusual criticism of META stock. Earlier this month, the Wall Street Journal’s Joanna Stern mentioned that the Meta’s latest virtual reality headset is out of touch with reality.

A Kerfuffle Up North

As if the above headwinds weren’t distracting enough for META stock, the underlying company now threatens to shut down news content in Canada. It’s a response to the government’s proposal for a new law that would force Meta to share revenue with local news organizations.

Per the Independent, the “law argues that digital platforms have a ‘bargaining imbalance’ with news organisations, and must make deals that would then be assessed by a regulator.”

On Meta’s part, management stated that the law “misrepresents the relationship between platforms and news publishers.” Either way, the company may lose out, thus adding even more pressure on META stock.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Article printed from InvestorPlace Media, https://investorplace.com/2022/10/why-is-meta-platforms-meta-stock-trending-today/.

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