Meta platforms (NASDAQ: FB), the technology giant formerly known as Facebook, was listed at $ 38 per share on May 18, 2012. If you had invested $ 1,000 in that listing, your efforts would be worth almost $ 9,000 today. But if you had waited and invested the $ 1,000 in the company after the stock fell below $ 18 in September, your efforts would be worth almost $ 19,000 today.
Either way, your initial investment would have easily surpassed S&P 500, which has risen about 260% since Meta’s first trading day. Let’s look back at how the company repeatedly defied the Bears and where this constantly evolving tech titan may be heading over the next few years.
How the market underestimated Meta’s growth potential
When Meta was listed on the stock exchange, it was a much smaller company. The social media platform’s flagship app Facebook earned 901 million monthly active users (MAUs) in the first quarter of 2012.
Instagram, which Meta bought just before its IPO, started 2013 with just 90 million MAUs. The company would first buy Oculus and WhatsApp in 2014.
Meta ended its most recent quarter with 2.91 billion MAUs on Facebook, as well as 3.58 billion monthly active people (MAPs) across all of its platforms. In other words, almost half of the world uses at least one of Meta’s apps.
This expansion silenced critics who believed that Facebook, like Myspace and Friendster, would disappear, leading to many years of rising revenue and profits:
How the market overestimated the regulatory threats
As Meta expanded, it encountered several major scandals. When the Cambridge Analytica breach revealed data from over 50 million users, privacy advocates scrutinized the company’s data sharing practices and targeted ads, and it was repeatedly accused of facilitating the spread of fake news stories.
The deadly Capitol riot in January, which resulted in Facebook banning former President Donald Trump from the platform, raised questions about the company’s ability to control its own content. Also a whistleblower recently accused the company repeatedly refuses to improve security on its own platforms.
As a result, Meta is now facing great pressure from public regulators. Fines have been fined in the US and Europe for data breaches, CEO Mark Zuckerberg has been repeatedly summoned to congressional hearings, and the company is currently facing demands from the Federal Trade Commission (FTC) to separate Instagram and WhatsApp.
Every time a new scandal broke out, the bears claimed that Meta’s high growth days were over. But the stock returned each time for two simple reasons: Meta’s massive user base makes it a standard choice for most advertisers along with Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google and many of Meta’s overseas users probably don’t care about its US-based scandals.
What does the future hold for Meta?
Meta still generates almost all of its revenue from targeted ads on Facebook and Instagram. This core business faces some short-term challenges that Meta handles Apple‘s (NASDAQ: AAPL) recent privacy changes on iOS that allow users to opt out of any app’s data tracking features.
But in the long run, Meta’s advertising business is likely to evolve, as it is more dependent on first-party data and contextual ads. It will also continue to expand its often-overlooked “other” department, which is growing faster than its advertising business as it sells more Oculus virtual reality headsets and Portal devices. It recently added a pair of Ray-Ban smart glasses to the hardware ecosystem, and it plans to launch additional augmented reality devices in the near future.
If we look even further ahead, Meta – as its new name suggests – plans to evolve into a metavers company that blurs the boundaries between the physical and digital worlds by merging its social networks, VR and AR ecosystems. That association can expand Meta’s ecosystem far beyond PCs and smartphones, while locking even more users into its services.
Are you still buying Meta today?
I sold my shares in Meta in early January because I thought the incoming regulatory threats and iOS changes would be too hard to overcome. But like many nearsighted investors, I have underestimated its resilience – and its share has risen almost 25% this year, even though it faced crisis after crisis.
If you believe that Meta will overcome its latest regulatory and platform challenges, then the stock still looks like an attractive investment with 23 times future earnings. To price-to-earnings conditions make it cheapest FAANG lager, as well as one of the most affordable player on booming metavers tendency.
This article represents the opinion of the author, who may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps us all think critically about investing and make decisions that help us become wiser, happier and richer.
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