Zuckerberg’s big virtual Bet has yet to give Meta stock a boost

New York: Mark Zuckerberg isn’t winning many converts on Wall Street to his vision of his social-media company as a play on immersive digital experiences.

Meta Platforms Inc. shares are roughly flat since October, when company changed its name from Facebook Inc. and the CEO laid out plans to transform it into a “metaverse-first” business. It’s the cheapest of the megacap technology stocks, trading at a 20 per cent discount to the Nasdaq 100.

Investors will be keen to learn more when Meta reports fourth quarter earnings after the market closes Wednesday about the social media giant’s progress on “the next frontier,” in part because Zuckerberg has said the initiative would be a $10 billion drag on operating profit in 2021. Any lead on that could determine the path for its beaten-down share price.

“Investors are going to require more visibility into what they are underwriting for management’s desired next leg of growth,” Brad Erickson, an analyst at RBC Capital Markets, wrote in a research note.

The shift to the metaverse - digital worlds where users can socialize, play games and conduct business - came right in the middle of public scrutiny about the effect on society of the company’s Facebook and Instagram platforms. That scrutiny has been a major overhang on its stock price.

Analysts predict Meta will deliver a slight dip in fourth-quarter earnings and show 19 per cent revenue growth, according to the average of estimates compiled by Bloomberg. The company is expected to break out results for Reality Labs, under which the metaverse bets sit.

Wall Street “will want to know how big the profit headwind could get in future years,” analyst Justin Post of Bank of America Corp. wrote in a note previewing results last week.