Should You Buy Meta Platforms Stock While It's Below $600?

Excitement around Meta Platforms (NASDAQ: META) has been fading fast. Despite its efforts to be a top name in artificial intelligence (AI) and its heavy investment in superintelligence, investors aren't convinced it's a good buy right now due to its heavy spending. To make matters worse, it's facing daunting lawsuits over its practices.

There's risk with the stock, but this is still a business with highly valuable social media assets, including Instagram and Facebook, that attract billions of monthly active users. Plus, with strong profits and a valuation that looks a bit more modest of late, there could be a strong case for buying the stock these days. Could Meta Platforms stock be a great buy while it's trading below $600?

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Has Meta Platforms become too risky an investment?

Concerns about Meta Platforms and its overall governance are not new issues for the business. Facebook has long faced problems with users spreading misinformation on its platform, and there have also been concerns about children spending too much time on the company's social media apps.

The difference, however, is that those cries are growing louder and lawsuits are emerging. Multiple states are now seeking penalties totaling as much as $1.4 trillion due to the company's addictive social media platforms and the dangers they pose to children. While that would undeniably cripple the business, it doesn't mean any punishment would be so significant.

But with more of a spotlight on child safety on social media these days, it's a risk investors can't gloss over anymore. In addition to the potential fallout from penalties resulting from social media lawsuits, there may also be significant changes in practices that could impact the business over the long term.

Given the uncertainty, a discount is likely warranted for the tech giant's stock.

Is Meta's stock too cheap to pass up right now?

Year to date, Meta's stock has fallen by 12%, and it now trades at 22 times its trailing earnings, which looks cheap compared to the S&P 500, where the average stock trades at 25 times its profit. Meta, with a much lower valuation, could be a compelling option.

However, I'd hold off on buying it because the issues it's facing today could impact its business significantly in the long run, and while it's trading at a reduced valuation, it may still not be low enough to compensate investors for the risk and uncertainty ahead for Meta. Taking a wait-and-see approach may be ideal.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.