Meta Platforms Faces Selling Pressure, Offers Potential Buying Opportunity

Meta Platforms‘ (NASDAQ: META) has seen its stock price decline significantly in recent weeks, with a decrease of nearly 30% from its all-time high in February. In contrast, the S&P 500 has fallen by almost 18% and the Nasdaq Composite is down approximately 23%, signaling a bear market. Some investors might view this sell-off as a chance to buy into Meta.

Meta owns widely used applications including Facebook, Instagram, Threads, Messenger, and WhatsApp. Notably, these platforms remain insulated from tariffs imposed by President Donald Trump on various imports. However, since a large portion of its revenue comes from advertising, the question arises: could these tariffs eventually impact Meta?

Consumer Spending and Advertising Budgets Amid Tariff Increases

The primary concern for Meta Platforms in the current climate revolves around consumer sentiment. Increased tariffs and ensuing trade conflicts could drive up prices, limiting consumers’ purchasing power. As a consequence, companies may cut back on advertising budgets, which are often the first area targeted for spending reductions during economic downturns. Analysts speculate this trend could manifest soon.

While a recession is not explicitly forecast, the rise in costs associated with tariffs is likely to hound the consumer landscape, forcing individuals to manage their finances cautiously. The true impact of tariffs on American consumer spending remains uncertain.

Should corporate advertising budgets be compromised, Meta Platforms may experience financial strain. In its fourth quarter, Meta reported $48.4 billion in revenue, with a remarkable $46.8 billion derived from advertising. The operating margin for this sector is impressive; the Family of Apps division reported a 61% operating profit margin—one of the highest in the industry. However, this number does not represent Meta’s overall profit margin.

In an effort to diversify beyond its advertising dominance, Meta is investing substantially in its Reality Labs division, which includes products like smart glasses, virtual reality headsets, and devices that merge AI with everyday technology. Despite these ambitious endeavors, Reality Labs has yet to prove profitable, posting $1.1 billion in revenue against a $5 billion operating loss in Q4.

If any product from Reality Labs gains traction, it could significantly alter investor perceptions of Meta’s stock. For now, however, advertising remains the core focus.

Meta’s Stock Valuation Appealing After Recent Declines

As a result of the recent sell-off, Meta’s stock now enjoys a relatively attractive valuation.

META PE Ratio data by YCharts.

Although we are not yet nearing the exceptionally low prices the stock saw in early 2023, a forward PE of 21 times earnings suggests Meta is a competitively priced option. If investments in innovative technology succeed and considering the strong presence of its digital platforms in the advertising space, Meta is likely to recover well from current challenges. While it may be prudent to refrain from buying the stock immediately due to volatility, it could emerge as a strong long-term investment once the market stabilizes, especially if agreements are reached to reduce tariffs.

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*Stock Advisor returns as of April 5, 2025

Randi Zuckerberg, a former director of market development at Facebook and sister to CEO Mark Zuckerberg, is currently a member of The Motley Fool’s board of directors. Keithen Drury holds no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. For additional details, please refer to our disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.