Wall Street in ITC-like love & hate relationship with this stock


Just like was India’s most loved and hated stock in the pandemic-hit 2020, the shares of Facebook-parent Meta now appears to be eliciting similar extreme emotions on Wall Street in 2022.

Trading at a PE multiple of less than 10 times after 68% drop from its 52-week high, one set of investors find the valuation irresistible while others are not willing to spare the Mark Zuckerberg-led tech giant for earnings miss and burning billions of dollars in metaverse “misadventure”.

Back in 2020, ITC too was similarly left orphaned by bulls as investors were whining over ESG concerns in the cigarette business and the conglomerate’s diversification in hotels and FMCG.

“It (Meta) is the ITC of 2022,” declared Rajeev Thakkar, who runs the Rs 27,000 crore Parag Parikh Flexi Cap Fund, at unitholders’ meet in Mumbai last week. The value investor was brave enough to have bought ITC at Rs 140 in March 2020 when the pessimism was at its peak phase and sat through a long period of underperformance till the tide turned in 2022.

The top money manager has also been owning Meta but can’t buy the dip due to Sebi restrictions on overseas investments. The fund manager appeared confident that Meta, irrespective of whether its mega bet on Metaverse project clicks or fails, will make money for investors who stick around for long enough.

“I don’t think the company is overvalued. WhatsApp and Facebook are growing well. While TikTok has taken some market share from Instagram, the latter is not dead,” Thakkar said.

Investors have also taken note of Zuckerberg’s cost cutting measures after macroeconomic downturn, increased competition, and ads signal loss caused revenue to be much lower than expected.

Fintech platform Vested Finance, which allows Indians to invest on Wall Street, has seen a sudden spike in investor interest for Meta stock.

“The top 25 most traded companies on our platform are still tech-heavy. Post Q3 results, purchasing activity in major technology stocks has increased significantly,” Viram Shah, Co-Founder and CEO of Vested Finance, told ETMarkets.

The recent tech rout on Wall Street impacted not just Meta but also other giants like Amazon and Google.

Analysts say dollar-cost averaging, which involves purchasing fixed amounts of stocks at regular periods (say, weekly or monthly) to gradually re-enter the market, can be an effective strategy.

“For investors who have more cash than their long-term strategy calls for, whether because they sold during the market downturn or for other reasons, should look to close the gap and invest and make the best use of dollar cost averaging,” Shah said.

Whether in the US or India, Meta bulls are hoping that the stock too will bounce back to life just the way ITC did later on.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times.)



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