Meta Platforms (NASDAQ:META) launched Threads today, and the social media community is buzzing. The text-based conversation platform briefly went live yesterday, giving users and investors an interesting preview of what it could do. Now the app is live, and as of this morning, more than 30 million people have already joined, including Kim Kardashian, Jennifer Lopez, and U.S. Congresswoman Alexandria Ocasio-Cortez. While this successful launch has thrust the social media giant into the spotlight, META stock isn’t reacting well. On the contrary, it is in the red after some strong volatility in early morning trading.
Does this mean that for all the momentum surrounding the Threads launch, Meta still isn’t a stock to buy? Let’s take a look at what some experts have to say about it.
What’s Happening With META Stock
As noted, it’s been a complicated morning for Meta, even as Threads downloads and signups have shot upward. While META stock hasn’t fallen too far, it also hasn’t seen the type of growth that often stems from a highly-anticipated product launch. As of this writing, it is down 0.1% for the day. With such a volatile trajectory, how it will finish the day is impossible to predict. However, its current trading pattern suggests that it has further to fall.
Yesterday, META stock rose as the pending launch generated positive momentum. Despite that bump, most of Wall Street likely isn’t surprised by today’s performance. Multiple analysts have expressed skepticism that the launch of Threads will have much impact on share prices, and if it does, it won’t happen in the short term. Justin Patterson of KeyBanc Capital Markets responded by raising his META price target, predicting a 14% upside. As Benzinga reports:
“In the short term, Threads will have minimal impact as Meta focuses on adoption rather than monetization, the analyst said. However, Patterson highlighted that the core ad platform remains robust, leading to an upward revision of the 2023 and 2024 earnings per share forecasts by 4%-10% to $12.81 and $16.77, respectively.
He attributed this optimism to strong top-line performance, operational efficiencies, and ongoing share buybacks.”
Ken Gawrelski of Wells Fargo also doesn’t see Threads launch having much impact on META stock. His team estimates that the annualized impact will account for roughly 1-3% of Meta’s revenue and earnings-per-share (EPS). In a recent note, Gawrelski stated that initial monetization from Threads will be limited to U.S. markets. That prediction comes in spite of the fact that it is currently available in over 100 countries. However, Threads is not yet available in the EU due to regulatory concerns.
What It Means
The market’s reaction to the Threads launch certainly supports the cautious predictions made by Patterson and Gawrelski. However, it should be noted that META stock currently maintains a strong buy consensus on TipRanks, with 36 out of 40 analysts rating it as a “buy.” Since the Threads launch began trending, both Patterson and Justin Post of Bank of America Securities have issued “buy” ratings. Despite predictions that the launch won’t have much impact on share prices, it’s clear that Wall Street is still highly bullish on META stock.
It should also be noted that Threads is launching at an excellent time. The new platform will succeed if it can lure users away from Twitter, and thanks to some of Elon Musk’s recent decisions, it is in an ideal position to do exactly that. Users have already made it clear that they intend to ditch Twitter for Threads. If that continues, it could certainly end up giving META stock the boost it needs to keep climbing.
On the date of publication, Samuel O’Brient 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.comPublishing Guidelines.
