Facebook goes public in 2012

On May 18th, 2012, Facebook, now Meta Platforms, Inc. (NASDAQ: META), went public with a vast IPO that was one of the most highly anticipated in years. Led by Mark Zuckerberg, the company has grown into the leading position in social media with both Facebook and the wildly popular Instagram. The question for investors is whether the stock is a good buy or has run its course. We have six big reasons investors should avoid the shares directly.

Meta Platforms stock is expensive

Trading at a whopping 30 times trailing earnings, the stock is priced for perfection, and while earnings have been solid, should they falter or miss estimates, the stock could get hammered.

If ad revenue drops, the company is in trouble.

Like all social media venues, Meta Platforms rely on advertising revenue to produce earnings. Should the economy go into recession in 2024, which many feel is possible as the interest rate increases catch up with the consumer, advertising budgets will be among the first to be trimmed. With a projected 98% of all revenues from advertising, a crumbling economy could crush earnings

The threat of government regulation

While there is no pending legislation we could source that would restrict social media platforms, the influence that Meta Platforms and others, especially Tik-Tok, have over younger users has been widely discussed, and some bans have even been introduced. Many parents have started restricting their kids’ social media usage and often ban them from it.

Censorship collusion with the government

Reports that the current administration colluded with Facebook and Twitter to censor misinformation on Covid 19 have come forward over the last year. In addition, reports also cite social media for not allowing reports on the Hunter Biden laptop during the 2020 election. Last summer, a federal judge prohibited several federal agencies and members of the Biden administration from working with social media companies. These actions have soured some in the investment community and retail investors.

There is always the threat of competition.

While Meta Platform is dominant in the social media world with Facebook and Instagram, there are the complex realities of competition. Evidence of the incredible popularity of TikTok is only needed to show how fast a new player can enter the crowded spectrum.

Demographics don’t necessarily favor the company

Younger social media users tend to avoid Facebook, while 23.7% of users are between 25 and 34. Over 40% are between the ages of 35-65. Some feel that as the country ages, social media will become less critical in the age of podcasts and other media outlets, especially with some perceived censorship that many outlets have exhibited.

 

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