Source: PaxForex Premium Analytics Portal, Fundamental Insight
A lot has changed for Meta Platforms over the past few years, and some things have changed dramatically. In 2018, the company was still known as Facebook, and it had serious problems with its reputation caused by numerous data leakage incidents.
The social media company was somewhat successful in trying to evade these problems; perhaps that's why the name change took place. Now, however, Meta Platforms is dealing with problems of a completely different kind. How will the company overcome these new challenges in the next half-decade or so? And should you buy the company's stock today? Let's look into it.
As we know, only a few people are completely immune to economic problems. Meta Platforms is not one of them. Over the past year, the company's main source of revenue, online advertising, has been hit hard. Businesses have cut their advertising budgets amid rising costs and a decline in demand for a number of products and services caused by high inflation.
Last year, for the first time in a long time, Meta's top line profits fell. The company's revenue was $116.6 billion, down 1 percent from 2021.
Five years will likely be enough time for the economy to recover from its latest downturn and boost the online advertising industry. In fact, this market still has room to grow. Online advertising allows for more targeted and cost-effective marketing campaigns, giving businesses an added advantage. According to some estimates, this market will grow at an average annual rate of 14.7% through 2027.
Thus, Meta's revenues should increase dramatically over the next few years, given the 3.74 billion monthly active users of its Web sites and apps. This ecosystem is too big to ignore.
One positive aspect of Meta Platforms is that it may still be in the early stages of its efforts to monetize some of its apps, especially WhatsApp. To that end, the company is working on paid messaging on the platform, a service the company says is gaining momentum.
WhatsApp and Messenger also have click-to-message ads (through which companies can communicate directly with customers). According to Meta, this feature has already generated $10 billion in revenue. That's just under 10 percent of the company's revenue in 2022, but in five years this feature will almost certainly account for most of the top line as it expands.
Meta has other tools in its arsenal. For example, Facebook Reels (short videos) are growing rapidly and represent another monetization opportunity. Or consider the e-commerce market, where the company has been striving to advance for several years.
Meta has introduced features such as Facebook and Instagram Shops to help sellers sell products online, especially making it easier for companies to access its vast user base. Its Shop Ads, which allow companies to place highly personalized ads based on users' buying preferences, are also on the rise. E-commerce is another significant long-term opportunity, and the company is expected to make significant strides on that front in the next five years.
Meta Platforms has also changed its name to reflect the increased focus on the metaverse. Currently, the company's massive investment in this potential $1 trillion opportunity is not yielding any results, as the metaverse is in a formative and work-in-progress stage that could be described as unfinished. Will this direction of the company be profitable in five years? Probably not, so it should continue to have a negative impact on Meta Platforms' performance.
Last year, the company's net income fell 41% year over year to $23.2 billion. But the company is in the middle of a campaign to cut costs and expenses. That includes layoffs and restructuring.
These initiatives should help the company better absorb the investment associated with the metaverse and stay on track to capitalize on this lucrative opportunity.
Although the company is facing difficulties, it is safe to say that Meta will emerge from the crisis again in a few years. The company's revenues should begin to grow again, as should the bottom line. At the same time, the company will make great strides in increasing monetization, which will lead to an increase in revenue sources.
These are the reasons why it's worth buying Meta Platforms stock today and holding it for the next few years.
As long as the price is above 198.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 211.05
- Take Profit 1: 220.00
- Take Profit 2: 230.00
Alternative scenario:
If the level of 198.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 198.00
- Take Profit 1: 193.00
- Take Profit 2: 183.00
