Meta (META.US) has risen 66% so far this year, and a Bank of Montreal analyst suggests investors wait and see.

Meta Platforms(META.US) stock has performed exceptionally well this year, but analysts at Scotiabank are advising investors to wait before buying in, rather than now. Nat Schindler, an analyst at the bank, began coverage of Meta and gave it a "Hold" (Sector Perform) rating, with a target price of $585, below Meta's Friday close. Meta's stock has risen 66% this year and 86% in the past 12 months. Meta closed Friday up 1.1% at $589.95, while the S&P 500 rose 0.61%. There are many reasons for Meta's stock rise. Meta is calling 2023 its "efficiency year" and has announced a series of cost-cutting measures. In addition, the company's investment in generative artificial intelligence has boosted this year's share price. Meta's stock has also benefited from investor optimism about virtual reality projects such as Meta Quest headsets and smart glasses, despite their relatively high costs. During its July earnings call, Meta's chief financial officer Susan Li said that the company's Reality Labs division, which is responsible for VR products, had an operating loss of $4.5 billion in the second quarter. Meta derives about 98% of its revenue from advertising, mainly on its social media platforms Facebook and Instagram. Schindler wrote in a research note that Meta needs to keep users interested in its social media platforms, which brings a lot of risk. He noted that "recent studies have shown that user activity is declining, and most American adults are becoming more selective in what they post." He also mentioned other issues, such as privacy concerns, misinformation, and ad saturation, that are reducing the time users spend on social media, which may gradually put pressure on Meta's key metrics. A decrease in daily active users would suppress revenue growth. This risk, combined with the company's high costs in artificial intelligence and virtual reality projects, is why Schindler is advising investors to wait. Data shows that of the 70 analysts surveyed by FactSet, 59 recommend "buy" for Meta Platforms, 9 recommend "hold", and 2 recommend "sell".