Should Warren Buffett buy Meta now?

January 25, 2025

Should Warren Buffett buy Meta now?

No. Too late. Buffett missed the Meta value train. Meta will continue rising for a while, enjoying the AI bubble and roller coaster ride. Our forecast at Creatix is that Mark Zuckerberg will become the wealthiest American billionaire later this year. AI is the gift that will keep giving for Meta and Mark. However, at its current record high price, Meta is no longer a bargain value buy for a value bargain investor like Warren Buffett. 

Hindsight is 20/20. How did Warren Buffett miss the "easy" Meta opportunity?

It is easy to see now that Buffett missed a very easy value investing opportunity with Meta in late 2022.  Buffett's Berkshire Hathaway should have bought Meta back when the stock went down almost 76% in November 2022 from a previous record high in September 2021. A 75% "clearance" sale on the leading social media company in the world was too glaring and obvious for Berkshire Hathaway to miss. What went wrong Warren? 

Mark Zuckerberg Almost Killed Facebook with the metaverse.

On September 7, 2021, Meta had reached a record high, closing at $382.18. A little over a year later, 14 months later, on November 3, 2022, Meta reached an intraday low of $88.09. That was an incredible drop of almost 77% drop. It was all tied to Mark Zuckerberg's missed judgement about the metaverse. 

On October 28, 2021, Mark Zuckerberg had announced that he was changing the name of his social media company from Facebook to Meta. Mark was pivoting the enterprise to pursue the metaverse, which Mark had incorrectly concluded would be the next big thing in technology back then. Meta announced plans to invest at least $10 billion into Reality Labs over the following year, underscoring its dedication to establishing a leading presence in the metaverse space. Meta followed through and began to pour billions into the metaverse concept. Soon, Reality Labs was reporting huge operating losses, losing approximately $13.7 billion in less than a year. The market did not react well. The stock lost almost 77% in value in 14 months, reaching a record low point in November 2022. Mark's fortune also declined by about 70% and he reported feeling sick to his stomach almost every morning. 

Many Analysts Saw What Warren Buffett Missed

Almost every analyst saw the upside potential for Meta back in November 2022. All it would take was for Mark to move on from the metaverse fiasco and refocus on the standard social media business. In November 2022, most analysts saw the easy upside potential for Meta. Among 50 financial services companies, the average price target was $170.93 (almost double the low of $88). The vast majority of analysts (29 out of 50) had 'buy' recommendation; 18 suggested a 'hold'; and only 3 advised a 'sell'. The highest 12-month price target was $375, proposed by Morgan Stanley's analyst Brian Nowak. This was an easy value proposition for Warren Buffett and Berkshire Hathaway, but they missed it.

Along came ChatGPT

In hindsight now we all know that back in 2021, the next big thing was not the metaverse, but rather generative AI propelled by OpenAI's ChatGPT. AI ended up saving Meta by convincing Mark that generative AI was a clear and present opportunity bigger and better than the metaverse. AI saved Meta, especially generative AI like ChatGPT. 

ChatGPT, developed by OpenAI, was launched on November 30, 2022. It quickly gained popularity, reaching 100 million users within two months. Following the success of ChatGPT and the growing emphasis on artificial intelligence (AI) in the tech industry, Meta began to shift its strategic focus from the metaverse to AI initiatives. In late 2023 and early 2024, reports indicated that Meta was prioritizing AI over its previous metaverse ambitions. Mark is not giving up completely on the metaverse. In September 2024, Meta announced efforts to integrate AI and metaverse technologies, aiming to develop new products that leverage both fields.

2025: Meta's Defining Year of AI

Earlier this month, in January 2025, Mark Zuckerberg declared 2025 as "the defining year of AI" for Meta, unveiling plans to invest between $60 billion and $65 billion in AI infrastructure. This investment includes constructing a massive data center and deploying over 1.3 million graphics processing units (GPUs) by the end of the year. This strategic pivot reflects Meta's recognition of AI's transformative potential and its commitment to leading advancements in this area.

The market has reacted super well to Meta's strategic pivot to AI. 

Meta owns the data generated by billions of humans in over 20 years of daily use of Facebook plus all the data captured by Instagram and Whatsapp in the last two decades from humans worldwide. If anyone can leverage big data for human-like generative AI assistants that can change the world, that is Meta. The market is pricing all that and Meta has reached fresh record highs in valuation. 

As of January 24, 2025, Meta has a market capitalization of approximately $1.63 trillion. The company's price-to-earnings (P/E) ratio stands at 30.59. On November 3, 2022, Meta's stock closed at $88.09 per share for a market capitalization of around $238 billion. Meta's P/E ratio back then was 8.0, which was a bargain that no one could miss, especially a savvy value investor like Warren Buffett. 

In a little over two years, from November 2022 to January 2025, Meta's market capitalization has increased by approximately $1.4 trillion with a price increase of 631%. Warren Buffett could have taken advantage of this opportunity, but failed to do so. 

Don't let that happen to you. Pay attention to the market. If you ever see the shares of a leading company down by 75%, look into it. In the case of Meta, everyone in the industry did. Almost everyone saw a great likelihood of Meta recovering and at least doubling its share price rather easily in 12 months or less. When you see a 75% "clearance" sale, stop by it and do your research. Had Warren Buffett and Berkshire Hathaway done it, they would be sitting comfortably today owning the leading social media company in the world and one of the top contenders to win the AI business war. 

Now you know it. 

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