Meta Stock Falls After HSBC Cuts Its Rating, Citing Competition and Uncertainty

Meta Stock

Meta Stock (NASDAQ:META)

In premarket trading on Friday, Meta Platforms (NASDAQ:META) stock fell by around 1.5% due to an investment company citing potential concerns, including greater competition, as the reason for its downgrading of the technology giant.

Meta stock was downgraded to “reduce” from “hold” by analyst Nicolas Cote-Colisson, who cites the risk of global economic slowdown and rising competition and regulation as near-term dangers to the business.

Cote-Colisson also said that it is anticipated that the growth of the GDP would decrease by 1.4% in 2024, which will have an effect on “nearly all” of the company’s income as well as all of the company’s earnings because they are directly tied to the digital advertising market.

In a letter to clients, Cote-Colisson said, “Comments on the investor call comforted on the progress achieved on short-form video with Reels (increasing engagement), but we still expect intense competition – including TikTok – and under-monetization compared to Facebook continuing into 2023.”

Recently, Senator Michael Bennet sent a letter to the CEOs of Apple and Google, requesting that they remove the TikTok app from their respective app stores.

This past week, Meta released its financial results for the fourth quarter, which led to a significant increase in the price of the company’s shares. This rise was partly attributable to the company’s ongoing success with developing its Reels product.

Even though the firm had success this week when a federal court ordered that it may purchase virtual reality startup Within Unlimited, Cote-Colisson pointed out that regulatory risks are considerable for Meta. This is even though the company achieved a victory this week.

Cote-Colisson believes that despite the challenges in the short term, the metaverse has the potential to bring significant upside in the long run. This is especially true because the firm was an early mover in the field.

Meta stock revealed a $40B repurchase program this week in addition to announcing quarterly earnings and outlook, presumably to reassure investors.

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