Why This Meta Platforms Analyst Is Turning Bearish

Meta Platforms Inc.’s (NASDAQ: META) short-term fundamentals seem to be deteriorating, as the Menlo Park, California-based company invests in the metaverse while facing a slowdown in revenue growth, according to one analyst.

The Meta Platforms Analyst: Needham analyst Laura Martin downgraded the rating for Meta Platforms from Hold to Underperform.

The Meta Platforms Thesis: Growth in the company’s costs is likely to significantly exceed revenue growth for the next couple of years, Martin said in the downgrade note.

Meta Platforms has also decided to “push users toward Reels, which monetizes at a lower rate than Newsfeed and Stories,” she added.

“We recommend investors remain on the sidelines while they assess several structural valuation risks including consumer behavior shifts, competition, moat degradation, regulatory risks and Metaverse investment risks,” Martin wrote.

She reduced the earnings estimates for 2022 and 2023 from $2.04 per share to $10.70 per share and from $13.31 per share to $9.89 per share, respectively.

META Price Action: Shares of Meta Platforms had declined by 4.28% to $163.40 at the time of publication Monday, July 11.