Meta Platforms (NASDAQ:META) has staged an impressive comeback from its lows last year, gaining over 250% to climb back above the $300 level. After the stock’s sharp ascent, some investors are wondering whether this rally has been overdone, and if this stock is due for a pullback. That’s especially the case if broader market sentiment turns more bearish. While I share some of those concerns over the near-term, I believe META stock is a “hold” at current levels for most investors.

One of my earliest ratings on META stock was a “buy,” back when it was trading around $112 per share last year. This was due to the company’s valuation dipping below $300 billion, making it intriguing.

However, that call was primarily based on its historically low valuation at the time. For new investors today, with the stock near $320 per share, I think there are better options in the short-term. Meta does not pay a dividend, unlike many mature tech stocks, and its valuation seems fair based on 2023 estimates. If Meta did return cash to shareholders instead of investing heavily in its metaverse vision, a dividend could make it more appealing for long-term investors.

In the near-0term, I won’t speculate on Meta’s price swings, as technical analysis depends heavily on overall market sentiment and does not offer value to long-term investors. So, for the long-term, I see META stock potentially appreciating to more than $400 sometime in 2025, barring a recession. That target aligns with Gurufocus’ estimated fair value. On average, Wall Street analysts forecast Meta rising to $376 over the next 12 months, representing 18% upside from today’s levels. While not insignificant, other tech stocks likely offer greater return potential.

Fundamentals Support Meta’s Comeback, But Headwinds Remain

Meta has rebounded sharply from last year’s crash that shaved nearly 70% from its value. Several factors drove this comeback.

First, Meta’s valuation became attractive, below 10-times forward earnings after the pullback. Investors saw the opportunity in a dominant, profitable social media leader. To add to that, Meta also delivered solid results in 2022 despite the challenging environment. Last year’s revenue barely declined, and operating margins stayed strong at 25% as Meta controlled costs amid the slowdown. In the latest quarter, we are seeing low-double-digit growth in Meta’s top line, along with steady user growth and improved monetization of formats like Reels. That’s quite the difference from when Facebook started to lose users in 2021.

Regardless, the icing on the cake that is really driving the stock is Meta’s investments in AI, like large language models like LLaMA. However, risks remain. A worsening macroeconomic environment could pressure digital advertising spending and Meta’s revenue growth. For example, Apple’s (NASDAQ:AAPL) tracking restrictions continue hampering Meta’s ad targeting and measurement capabilities. And as always, competition from TikTok in short-form video remains fierce.

For now, Meta appears fairly valued, in my opinion. The stock doesn’t look overpriced after its run back above $300. But with ongoing uncertainty, I don’t see Meta as a table-pounding “buy” either. For investors seeking tech exposure, other faster-growing names likely offer greater upside. Meta seems best-suited for long-term investors willing to wait for the AI and metaverse narratives to materialize into stronger growth in the years ahead.

Bull Case Sees Meta Climbing Above $400, But Patience Is Required

Looking further out, Meta has an upside potential above $400 by 2024. Here is my bull case for Meta in the long term:

• Meta continues adapting to Apple’s privacy changes, strengthening ad targeting and measurement. New formats boost revenue growth.
• Meta makes progress monetizing its metaverse investments in VR/AR, and establishes a long-term platform for the next computing paradigm.
• AI boosts user experiences, content quality, and safety across Meta’s family of apps, expanding its total addressable market.
• Operating margins remain strong at 25%+ as revenue growth rebounds and Meta’s efficiency gains trim cost increases to sub-inflation levels.
• Meta starts returning excess cash to shareholders through dividends.
• In my opinion, the biggest boost by far would come if TikTok was banned. It is in the cards for sure, and that would take tremendous pressure off of Facebook.

Under these assumptions, Meta could potentially reach even $500 by the end of 2025. However, this bull case depends on Meta successfully executing on initiatives like metaverse monetization that remain long-term and uncertain.

In the meantime, META stock will likely trade rangebound, and track broader tech and social media sentiment. The company must prove to investors that the AI and metaverse investments will enhance, not hinder, Meta’s growth in its core digital advertising business. Until tangible progress shows up in its results, many investors will take a “show me” approach to valuing Meta’s future opportunities.

The Bottom Line

For investors with a time horizon beyond two to three years, Meta offers an appealing risk/reward proposition at today’s levels. However, near-term patience will be required as Meta continues evolving its business for the next era of computing and social experiences. Any pullbacks driven by macroeconomic factors or other short-term issues could offer appealing entry points for long-term shareholders aligned with Meta’s vision. I rate this stock as a “hold.” If the company spent its metaverse capital on dividends instead, it would be a “buy” for sure.

On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.