It’s easy to see why so many traders are bullish on Meta Platforms (NASDAQ:META) right now. The company has been highly effective in utilizing artificial intelligence (AI). Plus, Meta Platforms’ quarterly financial results are impressive. However, this has already been priced into META stock, so it’s wise to wait for a pullback before jumping in.
I’ll admit, the temptation to invest in Meta Platforms right now is overwhelming. Multiple analysts on Wall Street are upgrading Meta Platforms shares and raising their price targets.
So, I can understand why traders might get caught up in the enthusiasm surrounding Meta Platforms. However, contrarians and value seekers should be careful. Waiting for a better share price isn’t easy to do, but it’s the right move when stocks overshoot to the upside.
Meta Platforms Leverages the Power of AI
CEO Mark Zuckerberg had valid reasons to declare that this company “had a good quarter” after Meta Platforms released its first-quarter 2023 results. The favorable data demonstrates Meta Platforms’ success in reducing expenditures by eliminating tens of thousands of jobs.
To back up this point, Meta Platforms beat Wall Street’s estimate of $27.67 billion in quarterly revenue by delivering $28.65 billion. Additionally, Meta Platforms outdid the analysts’ quarterly EPS expectation of $2.01 by reporting $2.20.
Particularly notable was Meta Platforms’ deployment of AI. The company reportedly stated (per Yahoo! Finance) that time “spent on Instagram went up by 24% since Meta launched AI-powered Instagram reels.” Furthermore, with AI playing a bigger role in Meta Platforms’ social media apps, “Reels monetization is up over 30% on Instagram and over 40% on Facebook on a quarterly basis.”
META Stock Doesn’t Look Like a Good Value Now
It’s fine to take note of Meta Platforms’ powerful use of AI and impressive financial results. On the other hand, the stock market can be highly efficient when it comes to pricing in all available information.
Sometimes, the market is so efficient that it overshoots in one direction or the other. This appears to be the case with META stock as it jumped from $210 to $240 post-earnings announcement.
Consequently, the Meta Platforms share price is quite close to its 52-week high of $241.69. Meanwhile, Meta Platforms’ GAAP trailing-12-month price-to-earnings (P/E) ratio of 29.85x is more than 50% higher than the sector median P/E ratio of 19.02x.
In other words, the market has already decided that AI-enhanced Meta Platforms is the greatest thing since sliced bread. Hence, contrarians ought to wait for a pullback instead of jumping on the hype train with META stock.
Pick Your Price and Be Patient With META Stock
When it comes to stock trading, waiting can be the hardest part. Yet, I encourage traders to wait for a share-price drawdown as too many people are already invested in Meta Platforms.
Meta Platforms is certainly on the right track as the company successfully deploys AI. So, it’s fine to buy some shares if and when the price comes down. $200 is a reasonable and realistic buy target for META stock. Keep watching and waiting, and be ready to start accumulating Meta Platforms shares in the near future.
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.
