Is Meta a stock to buy or dodge? Two tech investors face off

Published Wed, Oct 12 20227:41 PM EDTUpdated Thu, Oct 13 20229:23 AM EDT

These are tumultuous times for Meta , with investors fleeing the stock and the metaverse having its fair share of struggles and other economic headwinds. The company has lost about two-thirds of its value since peaking in September 2021. The stock in late September plunged to trade at its lowest since January 2019 — and has since dropped even more. It has lost over 60% year-to-date. Users are jumping ship and advertisers are reducing their spending, leaving Meta poised to report its second straight drop in quarterly revenue. Meta also lost $2.81 billion on $452 million in revenue from its virtual reality division during the quarter ending in June — as it spent heavily to develop virtual reality and augmented reality products. Even then, the company still has a dominant position in mobile advertising and has one of the most profitable business models on the planet. Even with a 36% drop in net income in the latest quarter , Meta generated $6.7 billion in profit. Two tech investors faced off on CNBC's " Street Signs Asia " on Wednesday to make a case for and against buying the stock. Why it's a buy Meta has a "true chance" of being successful, with its CEO Mark Zuckerburg "looking to the long-term path and survival" of the company, said Jake Dollarhide, CEO of Longbow Asset Management. "So it's a transformation in the metaverse he's looking to," he said. "Using AI [artificial intelligence] the way they're using AI, I think they have a true chance to be successful, or at least to right the ship until the metaverse starts giving the company more than 1.5% of its revenues." Zuckerberg has made clear that the future of the company is in the metaverse. "I'm really excited about what could come with WhatsApp and Messenger and Instagram within the metaverse — people talking to each other. Throw in the ability to buy a pair of Nikes and its strategic alliances with all these different companies. It truly is a different world," Dollarhide said. He added, "I wouldn't bet against Zuckerberg like I wouldn't bet against Elon Musk." A contrarian approach is one reason to go into Meta, Dollarhide said. "I want to buy low sell high, I'm more of a contrarian play," he said. "If something's really out of favor, I need to bet on it … and make good money for my clients." Why it's one to avoid Meta might be a "cheap" stock now, said Paul Meeks, a portfolio manager at Independent Solutions Wealth Management, but its estimates for revenue and earnings per share are continuing to drop. "Meta is relatively inexpensive. I think there is some real pain already priced in the stock," he said. "However, I think that you cannot be a contrarian investor and buy it now until you know when Wall Street earnings estimates are going to stop falling." The metaverse has "the potential to be just a lot of fluff," Meeks said. "Even if it ends up being an exciting industry, you know Meta's contribution might be hardware, and hardware is very low margin compared to legacy business," he said, citing the example of virtual reality headsets. "In the meantime, their legacy business is falling off a cliff, they're losing share to TikTok. And the digital advertising business, at least in the U.S., is way down and will continue to go down because we're in a recession." Meeks added that there are many better opportunities in the tech sector, such as large-cap stocks with "much clearer futures." — CNBC's Jonathan Vanian contributed to this report.