Meta (NASDAQ: META) stock has had a major pullback recently. At its peak in September 2021, this stock was trading near $385. Today however, it can be picked up for less than $130.
I own a number of ‘Big Tech’ stocks (Apple, Amazon, Alphabet, Microsoft) in my portfolio but I don’t currently own Meta. Is it worth picking up a few shares near the $130 mark? Let’s discuss.
Meta stock certainly looks cheap at the moment. At present, Wall Street analysts expect the tech company to generate earnings per share of $9.85 for 2022. At the current share price of $128, that puts the stock on a forward-looking price-to-earnings (P/E) ratio of 13 (assuming earnings actually come in at that level).
To put that multiple in perspective, Alphabet (the owner of Google), Meta’s main rival in the digital advertising space, currently has a forward-looking P/E ratio of about 19. So, on a relative basis, Meta stock appears to be quite cheap at the moment.
Cheap for a reason?
Comparing Meta’s products and services to those of the other Big Tech companies however, I’m wondering if the stock deserves to be cheap?
There’s no doubt that Alphabet has some fantastic services in Google and YouTube. I use Google every single day for work, shopping, travel planning, and more. And I’m increasingly using YouTube for work and entertainment too. These services provide an immense amount of value to the user.
Apple, Amazon, and Microsoft also have amazing products and services that offer a lot of utility. I have come to depend on my iPhone for communication, on Amazon Prime for next-day delivery online shopping, and on Microsoft’s Office and Teams for work.
Do Meta’s services offer the same level of value to the user? I’m not convinced they do. When I open up Facebook these days, I’m literally hit with a barrage of advertising spam, some ‘Reels’ I have no interest in, and some suggestions for groups that I’m not interested in joining. There’s very little real content from friends and family anymore. As such, I could easily live without the service.
I suspect I’m not the only one who feels this way. In recent quarters, Facebook’s user number growth has stalled. So, perhaps a lower valuation is appropriate here?
Can it turn things around?
Maybe things will all change. After all, Meta is going all in on the metaverse. Currently, it’s spending about $10bn a year in an effort to be a winner here. Who knows, in 10 years’ time maybe its metaverse will be an indispensable part of our lives?
At present however, I think the other tech giants have superior offerings to those of Meta. So I’m going to stick to the Big Tech shares I currently own and give Meta stock a miss for now.
