Will the metaverse see Facebook’s share price hit $400?

Facebook's [FB] share price is nothing if not resilient. Negative press and concerns that the company was putting profits before its users have undoubtedly put pressure on the stock.

The day after whistleblower Frances Haugen told MPs that the social media company ‘has unilateral control over 3bn people’, Facebook’s share price fell over 2% on 26 October.

Yet the stock hasn’t collapsed. In fact, it’s back on its upward trajectory with two Wall Street analysts betting that it could hit nearabouts $400 - in part due to Facebook announcing a major shift in strategy.

“Unilateral control over 3 billion people” - Whistlblower Francis Haugen discussing Facebook

 

 

What’s happening with Facebook’s share price?

Zuckerberg chose the end of October to announce Facebook had a new name. The company, not the app, is now to be called Meta.

“We’re going to be metaverse first, not Facebook first,” Zuckerberg said.

Facebook, sorry, Meta, plans to spend billions developing a virtual world where users interact, play games and shop - an idea touted as the metaverse. Think the internet but with VR headsets. Even the company’s ticker is changing from FB to MVRS on 1 December.

Facebook’s share price has responded positively to the news, gaining over 9% since the announcement. This reverses what has been a difficult time for the stock. From 1 September to 27 October, Facebook’s share price had slipped 17.7% going from $379.59 to $312.22 as negative news stories weighed on the stock.

On Friday 5 November, Facebook’s share price closed at $341.13, well below the $384.33 seen on 1 September. Considering the recent upward trajectory of the stock, now could be a buying opportunity.

 

 

Analysts back Facebook’s metaverse

JPMorgan analyst Doug Anmuth set a share price target of $390, confident that its 3 billion members give Facebook the installed base it needs to make its vision work. Anmuth reckons that early adopters will be game creators, but there is potential for virtual fitness and workplace applications in Zuckerberg’s meta-lution.

BofA is even hotter on the stock, offering a round $400 share price target, while maintaining its overweight judgement - hitting this would see a 17% upside on Friday’s close.

Analysts at BofA noted that Facebook’s recent third quarter earnings looked strong and its investment in its metaverse project could see long-term growth. In the third quarter, Facebook delivered earnings of $3.22 per share, topping Wall Street expectations.

Looking wider, Facebook’s share price has a 402.76 average price target on Yahoo Finance - hitting this would see a near 18% upside on Friday’s close.

 

 

 

Possible headwinds for the metaverse

Facebook’s advertising led business model is unlikely to change. Instead, the metaverse could feasibly be able to deliver more targeted ads to its users. For example, tracking what you’re looking at while walking down a virtual street, seeing who you meet in a virtual working space.

“If you're doing an augmented experience or a virtual experience, you could be collecting data on that user constantly,” Mark Skwarek, industry associate professor at NYU’s Tandon School of Engineering, told Yahoo Finance. “You'll be able to predict what people think.”

There’s a few barriers to Zuckerberg’s vision of humanity occupying an online world. The most obvious one is that most people don’t have the necessary VR equipment. According to Bloomberg Intelligence, it will take at least three years for Meta VR headsets to have an installed base of between 15m and 20m people.  And even if people do have the needed headsets, network providers may baulk at delivering the large 3D files needed to create meta worlds.

However, given the financial and cultural heft of Facebook, it’d be risky for investors to dismiss the company’s long term vision.