Meta, formerly known as Facebook, is the largest social media company and owns a number of popular platforms, including Facebook, Instagram, and WhatsApp. Investors believe that investing in META stock represents a once-in-a-generation buying opportunity.
Before turning 40, Mark Zuckerberg had already built this incredible globally connected social media empire. So, why would anyone bet against him over the next two decades?
2022 was a difficult year for stocks, particularly in the technology sector. The S&P 500 fell nearly 20%, while the NASDAQ, a tech-focused stock index, fell more than 33%.
The market declined for a variety of reasons. One major source of stock market trouble was high inflation. The Federal Reserve’s response of raising interest rates, with many expecting further increases through 2023, exacerbated the slump.
Here are some statistics:
Facebook has approximately 4 billion monthly active users (Im one of them).
WhatsApp has over 2 billion monthly active users but has yet to be fully monetized.
Instagram is still going strong, with over 2 billion monthly active users.
Meta Platforms has a cash balance of $42 billion and gross margins of 80%.
Meta’s high levels of engagement suggested that the company’s poor financial performance was more likely due to lower industrywide advertising activities – hampered by a weak economy, the war in Ukraine, and other factors – rather than a failure to retain and delight users. Reels, Meta’s short-form video service, for example, delivered 140 billion plays per day, a 50% increase from six months ago.
Meta is working to improve its advertising business through Reels, artificial intelligence, and better monetization. Investors will need at least a few more quarters to determine whether the recent drop in earnings is a blip or a permanent decline.
Meta still has 3.7 billion MAU across its social media apps and makes billions of dollars in profits — $9.3 billion in the most recent quarter. Furthermore, Meta expects Reels to maintain (and possibly improve) user engagement in the coming months.
On the other hand, Meta has made significant progress in the virtual reality and augmented reality space, which means that if it is correct and millions of people worldwide become immersed in the Metaverse, it could profit for decades to come.
In the current consumer environment, Facebook Meta will be an outperformer. This, combined with its massive size, should allow it to maintain a strong position regardless of where the economy is headed, making Meta a Strong Buy.
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