Following Meta Platforms (NASDAQ:) latest earnings release, analysts at Needham & Company questioned the reasons to buy the stock now, as its return on invested capitals (ROIC) decline.

Meta's Q1 EPS of $4.71 was $0.39 better than the consensus estimate of $4.32 per share. The company's revenue for the quarter, $36.46 billion, also exceeded the consensus estimate of $36.14 billion, further highlighting its strong financial standing.

Analysts stated: "Why buy META now, when management is saying that they are in a 2-3 investment cycle, and rev [revenue] will come in 3-4 years."

"We worry that Chinese discount retailers like Temu and Shein, which accounted for >20% of 2023 revs, will slow as the geopolitical tensions between the US and China over a TikTok ban heat up," added the firm.

Furthermore, Needham, which has an Underperform rating on the stock, highlighted its concern that expenses and capital expenditure estimates are rising faster than consensus estimates during 2024.

"Since META does not control either its distribution or content, the best question to us is- Does META have a terminal value? We think it is possible that META is only worth the PV of its FCF, without a terminal value," argues the firm.

Furthermore, the firm stated: "Recently, the US passed a law requiring ByteDance to divest TikTok within 1 year. We expect TikTok to sue to overturn this law, based on Free Speech. We do not think they will be successful, as the US will claim "national security". For META, we worry that rising geopolitical tensions between the US and China add risk to 20%-25% of 2023 ad revs that came from Chinese discounters like Temu, Shein, etc."