Source: PaxForex Premium Analytics Portal, Fundamental Insight
The technology-focused Nasdaq Composite includes hundreds of corporations, but few are as visible as those commonly named FAANG. This group includes several large companies, including Facebook's parent company, Meta Platforms, Apple, Amazon, Netflix, and Google's parent company, Alphabet. Even given their prominence, these companies have not got away from the recent sell-off.
The worst performing of these companies this year was Meta Platforms. Certainly, this social media company is going through a bad time, but will it bounce back?
Let's look at why Meta Platforms has performed so badly in 2022, starting with the company's main source of revenue - advertising. The difficult economic situation, characterized by high inflation, has caused consumers to spend less and companies to cut their advertising budgets.
In addition, fierce competition from the large number of social networks in which companies can advertise has not eased the situation. The result has been lower sales for companies like Meta Platforms, which rely heavily on advertising. In the first nine months of 2022, the tech giant's $84.4 billion in revenue grew less than 1 percent YoY.
While revenues are barely growing, costs and expenses are growing much faster, up 23.6 percent to $61.9 billion for the nine months that ended Sept. 30. Naturally, this resulted in a decline in Meta Platforms' bottom line. The company's net income per share fell to $6.82 for the period, down from $10.11.
Meta Platforms may continue to struggle unless it finds better ways to overcome these complex risk factors or until the economic environment enhance.
Despite all of these circumstances, Meta Platforms has excellent reasons to remain favored. It's hard to ignore the company's huge user base of 3.71 billion monthly active users (MAPs) across all of its websites and applications. Meta Platforms' MAP grew 4% YoY in Q3.
Regardless of how long it takes, the advertising industry will eventually recover, and once it does, Meta's revenue growth should increase.
It's also worth noting that the company has yet to fully monetize some of its apps, particularly WhatsApp. The company is currently working on this project.
CEO Mark Zuckerberg recently talked about two possibilities for monetizing WhatsApp. The first is in-message advertising. This feature allows companies to communicate directly with customers through message streams on Facebook Messenger, WhatsApp, or Instagram Direct while running Facebook or Instagram ad campaigns.
Zuckerberg said the option is one of the company's fastest-growing advertising products with annual sales of $9 billion, including $1.5 billion in WhatsApp, where Meta introduced the feature later than Messenger. The company also introduced paid messaging in WhatsApp, a feature it says is also growing rapidly.
Meta Platforms is still in the early stages of taking advantage of these monetization opportunities. In the coming years, investors should see WhatsApp bring even more to the company's top line.
Meta is also looking to compete with apps like Facebook's TikTok and Instagram, which have $3 billion in turnover on both platforms.
No doubt, Meta is still investing heavily in its metaverse ambitions. While they are unlikely to pay off anytime soon, they could end up representing a huge $1 trillion opportunity. Meta Platforms' robust ecosystem will allow it to become one of the leaders in this space.
The most crucial thing to keep in mind is that Meta Platforms still has plenty of opportunities to squeeze more money out of its billions of users. For example, the company can also advance in e-commerce.
That, combined with the rise that the advertising industry will eventually experience, should give investors hope for the future. What makes the deal even better is that Meta Platforms stock currently looks more attractive than ever.
As long as the price is above 108.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 120.03
- Take Profit 1: 139.00
- Take Profit 2: 155.00
Alternative scenario:
If the level of 108.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 108.00
- Take Profit 1: 98.00
- Take Profit 2: 88.00
