Meta Platforms (NASDAQ:META) has been around for quite a while. Yet, the company continues to test out new concepts in technology products. Consequently, Meta Platforms has a mix of opportunities and challenges in 2023. However, when all is said and done, it’s still smart to own META stock.
Some people are distracted by the idea of a cage match between Meta Platforms CEO Mark Zuckerberg and X (formerly Twitter) owner Elon Musk. I’ll admit, this is an intriguing story that’s hard to ignore.
Instead of being distracted by sensationalist headlines, though, I recommend focusing on Meta Platforms’ value proposition to the shareholders. That way, if you decide to hold META stock for the long term, you’ll know what you own and can be confident about it.
The Bear Case Against META Stock
First and foremost, I’ll be the first to concede that Meta Platforms may be overvalued at the moment. Indeed, Meta Platforms’ GAAP trailing-12-month price-to-earnings (P/E) ratio of 33.18x is significantly higher than the sector median P/E ratio of 16.62x.
This might convince some value-focused investors to avoid META stock. On the other hand, Meta Platforms’ valuation has been elevated throughout most of 2023, yet the share price still continued to climb.
Another issue pertaining to Meta Platforms is the uncertainty surrounding the company’s Threads short-form message app. Insider Intelligence analyst Jasmine Enberg evidently feels that Threads must find its footing amid fierce competition from X and TikTok.
As Enberg put it, the biggest challenge for Threads is “being able to find a unique identity outside of being a Twitter alternative and outside of the expansion of Instagram.” It’s well-known that many users have abandoned Threads since its seemingly auspicious debut. Hence, Threads will have to remain a “show-me” story until proven otherwise.
Meta Platforms’ Next AI Opportunity
Investors should take note of the bear case against META stock but look at both sides of the issue. There’s also a strong bullish argument in favor of Meta Platforms, and I’d say it overpowers the bearish thesis.
For one thing, Meta Platforms’ management isn’t just sitting around and letting Threads fail without intervening. Meta Platforms Chief Product Officer Chris Cox assured that the company is considering adding more “retention-driving hooks” to keep users coming back to Threads.
An example of these “hooks” would be “making sure people who are on the Instagram app can see important Threads,” Cox added. In any case, it’s certainly too soon to declare Threads a failure.
Besides, Meta Platforms still generates revenue from Instagram, Facebook and WhatsApp. Hopefully, the company can also gain traction with its metaverse business, including from sales of virtual reality (VR) headsets.
Additionally, Meta Platforms is relentless in pursuing advancements in artificial intelligence (AI) technology. In particular, UBS analysts expect Meta Platforms to introduce new generative AI functionalities “across WhatsApp, Instagram, and Facebook” in September.
META Stock Can Run Higher This Year
So far, Threads hasn’t been the Twitter or TikTok killer that some people might have hoped it would be. Moreover, prospective investors might find Meta Platforms’ comparatively high valuation off-putting.
Don’t dismiss the bull case, though. Meta Platforms remains proactive in developing generative AI capabilities across its popular social media apps. Furthermore, the company has opportunities to improve Threads.
Therefore, even if it looks expensive now, META stock should still have plenty of gas in the tank. I consider the bullish thesis to outweigh the bearish argument and recommend holding a share position in Meta Platforms.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.