Nasdaq Bear Market: Should You Buy Meta Platforms Stock on the Dip?

2 months ago 18

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Keithen Drury, The Motley Fool

Tue, Apr 8, 2025, 4:00 AM 4 min read

Meta Platforms' (NASDAQ: META) banal terms has been beaten down adjacent much severely than the broader marketplace implicit the past fewer weeks. The banal is down astir 30% from the all-time precocious it reached successful February, portion the S&P 500 is disconnected by astir 18%, and the Nasdaq Composite is down astir 23%, firmly successful carnivore marketplace territory. But the societal media company's sell-off whitethorn beryllium seen by immoderate arsenic a buying opportunity.

Meta owns the fashionable apps Facebook, Instagram, Threads, Messenger, and WhatsApp, truthful it isn't straight affected by the tariffs President Donald Trump has imposed connected imported goods from astir each country. But fixed that it derives astir of its gross from advertising, could it inactive upwind up a unfortunate of these tariffs?

The carnivore lawsuit for Meta Platforms successful the existent situation is chiefly tied to user sentiment. If tariffs, counter-tariffs, and commercialized wars origin the prices of goods to rise, consumers won't beryllium capable to bargain arsenic much. As a result, companies whitethorn trim their advertizing spending. Advertising is notoriously 1 of the archetypal places companies chopped their budgets to streamline costs during recessions and adjacent successful anticipation of economical downturns. That whitethorn hap present soon.

While I'm not predicting a recession, tariffs volition origin the terms of goods to rise, decreasing spending powerfulness and having the aforesaid effect of starring consumers to beryllium much blimpish with their money. The assemblage is inactive retired astir however overmuch these tariffs volition impact the American consumer.

But if firm advertizing budgets are affected, Meta Platforms could beryllium successful for immoderate pain. In the 4th quarter, Meta generated $48.4 cardinal successful revenue, $46.8 cardinal of which came from advertising. Additionally, the operating borderline from this part is outstanding. In Q4, its Family of Apps part posted a 61% operating nett margin. Few companies tin lucifer this, but that's not Meta's wide nett margin.

Meta is trying to get distant from being a one-trick pony, truthful it's heavy investing successful its Reality Labs division, which includes astute glasses, virtual world headsets, and galore different devices that integrate AI with commonly utilized items, arsenic good arsenic the company's metaverse platforms. However, the conception has frankincense acold been a wealth pit. In Q4, Reality Labs booked gross of $1.1 cardinal and an operating nonaccomplishment of $5 billion.

If 1 of these products becomes a hit, Reality Labs could wholly alteration however investors presumption Meta's stock. But arsenic of now, advertizing is its superior focus.