Should I buy Meta stock right now?

Last year was not a good year for tech companies. Meta (NASDAQ:META) was one of the hardest hit, as the stock fell 65%. However, CEO Mark Zuckerberg is determined to lead the rebound this year, promising “a year of efficiency”. Therefore, now may be the best time to buy Meta shares.

Despite losing more than $13.7bn in its Reality Labs division to date, Zuckerberg has added to Meta’s ambitions to become the market leader in virtual reality technology.

But to ensure that the company does not sink into unprofitability, the firm is planning to make another 11,000 redundant workers in the coming months, on top of the 10,000 released last year. This move is expected to prop up Meta’s earnings per share, and that’s why the stock has been doing so well.

More interestingly, the group jumped on the AI ​​bandwagon. It released its own Big Language Model to try to compete with ChatGPT and Google Bart. The goal is to be able to produce text, draw images, and also create media that closely resemble human output.

Although critics have labeled the move as a PR stunt, I beg to differ. I believe this could be very useful in increasing the revenue of apps like WhatsApp, which have struggled to generate meaningful results for years. And if successful, this could lead to a big rise for Meta stock.

Face reality

However, even if the development is exciting, Meta still needs to invest capital diligently. That’s because not many companies, if at all, lost $13.7bn. And if Zuck’s bet is going to pay off, he needs to make sure that Meta’s main revenue driver can offset the massive losses at Reality Labs.

This is where the investment case for Meta shares starts to falter – the saturation of the user base. The conglomerate gets most of its revenue from Facebook. It must have been successful in selling social media websites for the past two decades. That said, user growth has stalled.

In terms of Meta’s overall user base, daily and monthly active users have grown by only 25% over the past three years. While this is expected given the company’s large size, the stall in average revenue per user (ARPU) is also worrying.

Thanks to Meta, it has a growth driver in the form of Instagram to help stock it. The platform is starting to find its feet to generate meaningful income. Still, facing headwinds and increasing competition from TikTok, snap, Pinterestand YouTube Shorts.

However, the business still has a runway due to strong financials. Having said that, shareholders should keep an eye on the balance sheet as spending from Reality Labs has seen its cash levels and free cash flow deteriorate.

So, is Meta stock worth buying? Well, the price multiples have risen again from the bottom. Even so, he likes it Citi, Goldman Sachs, Germanand many others are still bullish on shares, reiterating their ‘buy’ ratings.

However, it should be noted that the stock only has an average price target of $209. This is roughly only 4% up from current levels. So, I am not really interested in investing in Meta stock.