Since the stock's most recent low in November, Meta has outperformed all other components of the S&P 500 Index, rising 54%.

Given how much money the owner of Facebook and Instagram continues to invest in creating its own version of the metaverse, Meta Platforms Inc.'s recent market-beating rise is failing to persuade some critics.

Since the stock's most recent low in November, Meta has outperformed all other components of the S&P 500 Index, rising 54%.

The social media company's statement that it will eliminate more than 11,000 positions—the first significant round of layoffs in the history of the business—was one of the factors contributing to the rebound.

But there are several indications of doubt: Even after the jump, Meta is one of the cheapest stocks in the Nasdaq 100 Index and trades for less than half of its average price-earnings multiple over the previous ten years. Its shares are still 64% behind its record high from 2021, and experts anticipate a meagre 7.7% increase in the stock price over the coming year.

The issue, in the eyes of the bears, is that Meta's costly wager on the metaverse, an immersive virtual environment, isn't going anywhere any time soon and will represent a fifth of total expenses this year. And due to changes in Apple Inc.'s privacy rules that make it more challenging to target customers with ads on its devices, its once lucrative ad revenue is stalling.

The company's expenses would remain "quite high" due to the metaverse, according to Louise Dudley, global equities portfolio manager at Federated Hermes. “Meta is less of a bull case than the other mega-caps because of its high execution risk”.

For the surge to continue, Meta may need to provide investors with greater clarity on a few issues, such as its approach to contending with competition from social media rivals like Tiktok.

Investors will want to know how much of a dent Apple's privacy policy change is still having on ad income, which is maybe more important. In February, Meta predicted Apple's decision would result in an annual revenue loss of $10 billion.

And other proponents of the metaverse still hold out hope that Chief Executive Officer Mark Zuckerberg may reduce his spending even more or give up entirely. The impending economic recession, which is reducing revenues at tech businesses, might force his hand.

The fourth quarter earnings release from Meta on February 1 will serve as a test. According to Bloomberg data, analysts have decreased their average forecasts for revenue over the past six months by 15% and adjusted earnings per share by 27%.

Nevertheless, there are many bulls. Doug Anmuth of JPMorgan Chase & Co. recently changed his recommendation for Meta from neutral to overweight while pointing out the stock's low values. And according to 41% of investors surveyed by JPMorgan this month, Meta will be the best-performing mega cap internet firm in 2023.

(bloomberg.com, cnbc.com)