Investing In Meta Stocks

Euronews

What Is Meta?

Meta Inc. (META) is a company incorporated in California, United States, that owns some of the most popular social media platforms and applications in the market.  These include the largest social networking platform, Facebook, Instagram, the popular photo-sharing application, and two messaging applications, WhatsApp and Messenger. 

Starting off as Facebook (FB), we could say Meta was founded in 2004 by four Havard University students, one of which is still ahead of the company today. We refer to the Chief Executive Officer (CEO), Mark Zuckerberg. The company’s name only got changed to Meta on October 28, 2021.

Today, the Meta company is classified as a part of the communications services sector, offering social media services to over 3.6 billion users worldwide. 

However, when we talk about Meta stocks and forecasts, we need to go deeper than just what Meta is as a company. We look at the stocks and performance of the company to see where it could end up over time.

Meta Stocks

Only recently changed from “FB” to “META” in June 2022; Meta’s (Facebook) first initial public offering (IPO) was in 2012 when it got its first valuation of over $102 billion. This number has more than tripled today, as the company possesses a market cap of over $560 billion

Over the last three years, Meta has enjoyed average revenue growth of 25%, with the company ranking in $117 billion in gross revenue and $39 billion in net profit in 2021. This growth is expected to continue over the coming years, with “the Metaverse,” an augmented reality product from Meta, serving as a bolster.

However, the Meta company competes against other top companies like Alphabet (GOOGL), Apple (AAPL), and Twitter (TWTR). Activities from one of these companies have caused a drop in one important KPI for Meta stocks.

Apple (AAPL) And The Drop In Meta Quarterly Revenue

Meta generates most of its revenue from advert services, with larger enterprises and political organizations taking this to their full advantage. For the company to achieve this, however, it collects information about the activities of its users.

Quite recently, at the end of 2021, Apple released an update on iOS. This update required applications to collect permission from users to engage in tracking activities, which are so important to Meta. Many users didn’t grant this permission, and this caused companies and organizations to back out of targeted advertisements on Meta products. 

Although Meta reported a $27 billion revenue in the first quarter of 2022 (up to a 6% increase from 2021), this was a drop from its $33 billion revenue from the fourth quarter of 202. 

Looking at Meta stocks forecasts, will this decline continue? We could only wait to see how more users respond to the need to grant permission to Meta applications for tracking. 

Decrease In Meta DAU

Meta Reporting Period Meta Products DAU (billions) Percentage Growth In DAU
Q4 2021 1.92 5%
Q3 2021 1.93 6%
Q3 2020 1.82 10.9%
Q3 2019 1.623 8.65%
Q3 2018 1.495

Alongside the presentation of Meta revenue from the fourth quarter of 2021 was a report on the daily active users (DAU) of Meta products. The drop from 1.930 billion in Q3 to 1.929 billion in Q4 indicated the first time in Meta/Facebook history that the company recorded a drop in its DAU.

Additionally, although this represented a 5% increase from Q4 of 2020, it remains subpar to the 10.9% increase in 2020 and the average of 8.5% that previous years were able to achieve.

The company states that this drop was mainly caused by younger users leaving or limiting their time for competitors like the newer TikTok (which is starting to record over 1 billion MAU) and YouTube. 

Meta stocks forecasts also indicate the company will experience slower growth in both DAU and revenue over the next few quarters. 

Enough of all this negativity and reasons to sell Meta stocks. Here are a few reasons you may want to buy Meta stocks.

The Metaverse

The newest addition to Meta products is the Metaverse, which is an impending virtual and augmented reality platform or “world”. It is a product with a $10 billion investment from Meta that intends to connect people over the internet in a way that adds more realism to interactions.

If Meta achieves what it intends, the Metaverse would be the most prominent and most adopted of its kind, achieving feats as Facebook has. What’s more is that it is separated from the more ” toxic” environment that all social media platforms breed, and its adoption of it will receive little opposition.

The demand for this product may be a boost that overshadows the slow growth of Meta DAU and revenue. Meta stocks forecasts on this indicate a reason to buy.

Meta Stocks Are Seemingly Undervalued

Morningstar compiled a list of undervalued stocks for the third quarter of 2022. Meta stocks (META) made it to the list, with sources saying they are up to 58% undervalued.

The P/E ratio and stock prices are historically lower than in previous years. With other large market cap companies trading at higher prices,  with experts expect a correction of this  

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