Meta is a 'top recession stock' for 2023, analysts say, after shares tanked 65% this year

Published Wed, Dec 21 20228:39 PM EST

Wall Street analysts are bullish on Meta Platforms for 2023 after shares in the company nosedived by more than 65% this year. The decline is the largest among mega-cap stocks, with many analysts saying shares in the company have fallen too far. The stock dropped by 24% in a single day after its most recent results. Evercore ISI Mark Mahaney, head of internet research at Evercore ISI, said the share price drop wasn't because the company missed revenue numbers or reported poor metrics, but because of the scale of investment in its yet-to-be-proven metaverse technology. "It's because their guidance on the expense growth for 2023 sounded reckless to the market," Mahaney told " Squawk Box Asia " on Friday. Two weeks after reporting its earnings, CEO Mark Zuckerberg was forced to scale back spending plans , according to Mahaney. As a result, while the stock has since risen by about 16%, it remains down by more than 65% this year. "I get the sense that there's more cost-consciousness, and that's a good positive thing for investors," said Mahaney, who expects shares in Meta to rise by 48.5% to $170 over the next 12 months. Bank of America Bank of America analysts have also become bullish on Meta's shares after the company announced its cost-cutting measures. The analysts have called Meta a "top recession stock" and expect shares to rise by 19% to $136 next year if Facebook's parent can keep costs to a minimum through the recession. "[Meta and Alphabet] stocks have more valuation support vs. history, and while revenue estimate cuts for advertising stocks are very likely in a recession scenario, we would anticipate accelerating cost-cutting activity in 2023 to result in smaller [earnings per share] cuts vs. peers," the analysts said on Dec. 15 in a note to clients. Goldman Sachs Cost-cutting isn't the sole factor behind the bullishness on Meta. Goldman Sachs also expects to see organic growth at Meta thanks to its recent investments in the short-form video format, mimicking TikTok . "We remain focused on Meta's large scale audience across their Family of Apps, against which the company can continue to align evolving consumption habits within short-form video, messaging, commerce, augmented reality & social connections," Goldman's analysts said, giving the stock a $165 price target. Deutsche Bank While Meta may have addressed some of the market's immediate concerns, Facebook and Instagram face some headwinds. European Union privacy regulators have introduced rules that could limit the data that Meta can access to sell advertisements. The regulators said Facebook and Instagram would need to obtain the consent of users explicitly, rather than discreetly through their "terms of service." "The decision doesn't directly order Meta to change practices, but rather calls for the Irish regulators to issue public orders that reflect its decisions, along with fines, given that Ireland is where Meta's European headquarters is based," said Deutsche Bank's equity analyst Benjamin Black, who expects Meta shares to rise by another 9.2% to $125 a share. The EU's rule could blunt Facebook's ability to target advertising further. According to Meta, Apple's privacy features on its iPhones have already cost the social media giant $10 billion in revenue . — CNBC's Michael Bloom contributed to this report