This top tech analyst just tapped Meta Platforms as a 'high-quality' discount opportunity with up to 50% upside

Yet its shares plunged more than 26% on Thursday — the biggest one-day drop ever for the company — on highly disappointing Q4 results.

Facebook’s daily active users fell by about half a million for the quarter, marking the first decline in this metric in the company’s history. And for the current quarter, management expects revenue to grow a disappointing 3% to 11%.

But not everyone’s so bearish.

Mark Mahaney, head of internet research at Wall Street firm Evercore ISI, maintains an outperform rating on Meta. He also has a price target of $350 on the shares, implying potential upside of around 50% from current levels.

Let’s take a quick look at Mahaney’s bull case — now might be the opportune time to jump into Meta.

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TikTok fears overblown

While Meta’s family of apps largely dominates the social media space, it isn’t without competition. The most notable threat comes from TikTok — the wildly popular platform for creating, sharing and discovering short videos owned by China’s ByteDance.

In 2021, TikTok surpassed Google as the most visited website in the world.

“TikTok is so big as a competitor already and also continues to grow at quite a fast rate off of a very large base,” Meta CEO Mark Zuckerberg acknowledged in the most recent conference call.

But Mahaney points out that Meta is more than diversified enough to withstand the threat.

“Competition is there from TikTok, but it’s primarily to the Instagram asset,” the analyst told CNBC. “It’s not WhatsApp and it’s not the core Facebook or Facebook Messenger.”

Meta isn’t standing still, either.

The company is pushing Reels, its short video product on Instagram. While the product will take time to monetize, Zuckerberg said that Reels is now the company’s “fastest growing content format by far.”

Good value for money

Even with the rough start to 2022, the stock market as a whole continues to look bloated. The S&P 500 currently trades at a price-to-earnings ratio above 25 — substantially higher than its historical long-term average of 16.

In the internet sector, value is even harder to find. According to data from NYU Stern School of Business, internet stocks currently boast an average P/E of 84.

But Meta might now be a rare bargain in the bunch.

In 2019, Meta’s P/E ratio was 33. Today, thanks to the stock’s recent plunge, it has a P/E in the mid-teens, representing a substantial discount from both its historical average and the sector’s current sky-high multiples.

"We're now pretty close to a trough multiple," Mahaney noted. "We're like a turn away from that 17 times [earnings multiple] that it based out in 2018."

Growth in the metaverse

Let’s not forget why Facebook changed its name to Meta.

In the company’s own words, the focus of Meta will be “to bring the metaverse to life and help people connect, find communities and grow businesses.”

While many investors consider the metaverse to be the next big thing, Meta is already making it a reality. The company acquired virtual reality headset maker Oculus in 2014, and that investment is paying off handsomely.

Oculus rose to the No.1 most downloaded app in the App Store on Christmas Day, suggesting that VR adoption is indeed going mainstream.