Meta has risen by 66% year to date, analysts at DBS Bank suggest investors to wait and see

According to the financial news app Zhitong Finance, Meta Platforms (META.US) stock has performed exceptionally well this year. However, analysts at Scotiabank in Canada suggest that investors should adopt a wait-and-see approach rather than buying now. Analyst Nat Schindler from the bank has initiated coverage on Meta stock with a "Sector Perform" rating and a target price of $585, which is lower than Meta's closing price on Friday. Meta's stock price has risen by 66% this year and 86% over the past 12 months. On Friday, Meta closed up over 1% at $589.95, while the S&P 500 index rose by 0.61%. There are several reasons behind the rise in Meta's stock. Meta has dubbed 2023 as its "year of efficiency" and announced a series of cost-cutting measures. Additionally, investments in generative artificial intelligence have boosted the stock price this year. Meta's stock has also benefited from investors' optimism about virtual reality projects such as Meta Quest headsets and smart glasses, despite the relatively high costs of these projects. During the earnings call in July, Meta's CFO Susan Li stated that the Reality Labs division responsible for VR products operated at a loss of $4.5 billion in the second quarter. About 98% of Meta's revenue comes from advertising, primarily on its social media platforms Facebook and Instagram. In his research report, Schindler emphasized the need for Meta to maintain user interest in its social media platforms, highlighting significant risks. He noted, "Recent studies have shown that users are posting less actively, and most American adults are becoming more selective when posting content." He also mentioned that issues such as privacy concerns, misinformation, and ad saturation are reducing users' time spent on social media, which could gradually put pressure on Meta's key metrics. The decrease in daily active users will hinder revenue growth. This risk, coupled with the high costs of the company's artificial intelligence and virtual reality projects, is why Schindler advises investors to adopt a wait-and-see approach. Data shows that out of 70 analysts surveyed by FactSet, 59 recommend "buying" Meta Platforms, 9 recommend "holding," and 2 recommend "selling"