Why Meta Platforms Is Sinking Today

Shares of Meta Platforms (NASDAQ: META) are sliding on Tuesday. The social media giant's stock lost 4.1% as of 2:30 p.m. ET and was down as much as 5% earlier in the day. The drop outpaces the broader market decline, as the S&P 500 (SNPINDEX: ^GSPC) fell 1.3% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) lost 1.9%.

The company behind social media platforms Facebook, Instagram, WhatsApp, and Threads faced pressure after an analyst lowered its price target amid a wider tech sell-off.

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Analyst downgrades Meta amid a sell-off

KeyCorp reduced its price target on Meta from $750 to $710 in a report released Tuesday, maintaining its "overweight" rating. While the new target still represents a decent upside from Meta's current price, the drop was significant.

The Nasdaq-100 is down more than 12% this month as trade tensions escalate between the U.S. and key partners in many tech companies' supply chains. Moreover, persistent inflation, declining consumer sentiment, and recession fears have led many to move capital out of tech and into safer investments.

A questionable AI integration

It was also reported today the Meta was experimenting with giving users on Instagram the ability to have artificial intelligence (AI) write their comments. In my view, this is a feature that few would be genuinely interested in, and if it became pervasive, would significantly degrade the experience.

This is another attempt to leverage AI to enhance Meta Platforms' offerings in ways users don't appear to want. Earlier this year, the company faced pushback after introducing AI-generated profiles that could interact with real users, posting, liking, and commenting just as a human would.

Still, these missteps are small potatoes in the long run. I think that Meta remains one of the better investments in tech and is priced well at a price-to-earnings ratio (P/E) of 25.3.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Johnny Rice 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.