Meta Platforms’ 11% June Slide: Underlying Pressures Explained

Key Points

Shares of Meta Platforms experienced a decline last month amid a range of concerns, including workforce reductions, excessive spending on artificial intelligence and capital projects, and uncertainty regarding a sustainable revenue model beyond advertising.

The decline accelerated after a report indicated the company intended to issue additional shares to finance its AI initiatives, resulting in an 11% drop by month‑end, according to S&P Global Market Intelligence.

As illustrated by the chart below, the stock showed a steady downward trajectory throughout the month.

META data by YCharts

Why is Meta sliding?

Meta stands apart from the other major cloud providers — Amazon, Microsoft, and Alphabet — by lacking an in‑house cloud computing service, despite plans to launch one.

This absence of a cloud platform increases the risk associated with its planned capital expenditure of $125 billion to $145 billion this year, a factor that contributed to the stock’s decline last month.

On June 5, the shares fell 6% following a Financial Times report that the firm was contemplating a multi‑billion‑dollar equity offering to support AI‑related spending. The sell‑off reflected concerns that Meta is expending roughly $20 billion annually on Reality Labs, its AI division, without yet delivering measurable returns.

In line with growing scrutiny of social media, the United Kingdom has enacted a ban on social media use for children under 16, a move that may encourage similar actions elsewhere.

Additional reports highlighted low employee morale following repeated layoffs and comments from CTO Andrew Bosworth describing the AI reorganization as “atrocious.” The head of AI for Work also announced an imminent departure.

Image source: The Motley Fool.

What’s next for Meta

Meta’s shares rose on July 1 after Bloomberg reported that the company was preparing to launch its own cloud computing service, a plan that had been under consideration for some time.

Following the recent price decline, Meta’s valuation appears attractive, trading at a price‑to‑earnings multiple of roughly 24 after adjusting for a one‑time tax benefit recorded in the first quarter.

This suggests a compelling entry point for investors, provided the company can demonstrate prudent use of its capital expenditures to unlock future growth.

Should you invest in Meta Platforms now?

Investors should weigh the following considerations before acquiring Meta stock.

According to The Motley Fool Stock Advisor, the analyst team has identified ten stocks they consider optimal for current investment, though Meta was not among the selected titles.

Historical examples illustrate the potential upside of such recommendations; for instance, an investment made when Netflix entered the list in December 2004 would have grown $1,000 to $409,970, while a pick made when Nvidia was added in April 2005 would have turned $1,000 into $1,200,223.

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