Altimeter’s Brad Gerstner, an investor in TikTok’s parent firm, remains bullish on Meta. Here’s why

Published Tue, May 3 20222:07 PM EDTUpdated Tue, May 3 20222:14 PM EDT

Altimeter Capital founder Brad Gerstner told CNBC on Tuesday he's optimistic on Meta Platforms , contending the Facebook and Instagram parent will be able to overcome its recent stock slide. In an interview on "Halftime Report," Gerstner suggested one of the reasons he's confident in Meta is actually his fund's investment in ByteDance. The privately held Chinese tech firm owns TikTok, which has soared in popularity and become a primary competitor of Meta's social media platforms. "Facebook, for the better part of the last decade, has been a friend or social discovery engine. They showed you content that your friends recommended. They've made massive investments over the last couple years to turn themselves into an artificial intelligence discovery engine. That is the secret behind TikTok," Gerstner said. "We're investors in ByteDance, TikTok. We know a thing or two about why they've been successful in targeting customers," he continued. "When you make that transition to [AI discovery engine], you go from being able to recommend 2,000 pieces of content to 2 billion pieces of content, so we think [Meta is] in the early phases of an engagement expansion game." As TikTok took off, particularly among young people, Meta developed a rival short-form video feature called Reels. Launched in late 2020, it now accounts for about 20% of the time users spend on Instagram, CEO Mark Zuckerberg said last week on Meta's earnings call. "They aren't monetizing it that much. There's no reason — in fact, we think they have the best monetization engine in the world — that they won't be able to monetize Reels as we go into the back half" of this year, Gerstner said. "We think that growth accelerates into the back half significantly, and you're doing it with a company ... that has a disciplined approach to free cash and to buybacks, so we feel like you have a protected downside and a lot of optionality to the upside," the tech investor added. Meta is down about 36% year to date, making it one of the worst-performing stocks in the S & P 500. To be sure, it's been a challenging year for Wall Street more broadly, especially the tech sector. The tech-heavy Nasdaq Composite is down about 19% in 2022. Gerstner said there's no doubt markets are facing a range of uncertainties, including the Federal Reserve's policy tightening, high inflation, economic growth concerns and the Russia-Ukraine war. This makes it impossible to predict when the stock market will reach a bottom, he said, but "we do know that we're closer to it today than we were last October." Gerstner was referring to his appearance on CNBC on Oct. 19 , when he warned investors to prepare for market valuations to compress as the Fed raised interest rates. "Now I think is the time, whether you're playing from home or you're a professional investor, you have to find opportunities to buy," Gerstner said Tuesday, adding: "If you're an investor investing over a one-, two-, three-year time horizon, find your best ideas and put money to work." Watch CNBC's full interview with Altimeter's Brad Gerstner above.

Investors are staying on the sidelines amid a broad selloff in tech stocks this year. Shares of Facebook parent Meta are down more than 30% this year amid a troubling macro environment and weaker-than-expected results.

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Altimeter Capital founder Brad Gerstner told CNBC on Tuesday he's optimistic on Meta Platforms, contending the Facebook and Instagram parent will be able to overcome its recent stock slide.