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Facebook in Bear Market, but Morningstar Says It's Undervalued

'We have continue to rate [Meta Platforms] a wide-moat firm with a solid network effect and intangible assets,' Morningstar said.
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Meta Platforms (Facebook)  (FB) - Get Meta Platforms Inc. Class A Report has entered a bear market -- dropping more than 20% from its Sept. 1 record, amid an onslaught of criticism and regulatory action against it.

The S&P 500’s 5% correction since Nov. 22 hasn’t helped either. 

The Menlo Park, Calif., social-media giant closed regular Friday trading at $306.84, down 1.1%. It’s still up 12% year to date amid strong financial performance.

Morningstar analyst Ali Mogharabi puts fair value for Meta/Facebook at $404.

“We have not changed our view on Meta and continue to rate it a wide-moat firm with a solid network effect and intangible assets as economic moat sources,” he wrote Oct. 29, after the company changed its name from Facebook.

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“As users on Facebook and Instagram continue to grow, admittedly at decelerating rates, we expect advertisers will keep coming.

“The firm last reported that 3.58 billion people access at least one of its apps per month, generating first-party data to improve ad effectiveness, offsetting challenges like Apple’s  (AAPL) - Get Apple Inc. Report iOS changes. We also expect e-commerce to drive further top-line growth.”

Meta’s augmented- and virtual-reality offerings represent less than 5% of total revenue now, Mogharabi noted.

“However, we think monetization opportunities will come from both sales of additional virtual reality hardware and revenue sharing with merchants and content creators selling digital or physical products.”

Newbridge Securities Chief Market Strategist Donald Selkin told Bloomberg that Meta is reasonably valued now, with the recent drop reflecting all the bad news. “It’s worth sticking your toe in the water,” he said.

But David Trainer of investment research firm New Constructs sees Meta as the worst among its mega-cap peers, according to Bloomberg.