Key points:
- Meta Platforms shares are in uncharted territory after the recent selloff.
- The company is facing existential threats from multiple sources.
- I would wait till the worst is over before considering buying the shares.
The Meta Platforms Inc (NASDAQ: FB) stock price has fallen 31% this year after the social media giant lost users for the first time since its founding in 2004.
Investors were shocked to see the company lose users in its key growth markets of Africa and Latin America after growth in Europe and North America slowed down in recent years.
Meta saw its shares plunge 26% after releasing its earnings results for the last quarter of 2021, losing over $250 billion in value as investors dumped their shares.
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The social media giant also finds itself at a crossroads with European regulators that have passed new laws that require the company to store users’ data within the region.
Facebook currently transfers most of its European users’ data to the United States via Standard Contractual Clauses, which it has warned could come under judicial and regulatory scrutiny.
The company threatened to shut down its Facebook and Instagram services within Europe if forced to abide by the new rules. However, EU leaders have reiterated their stance regarding the new rules, with some saying that life without Facebook and Instagram would be great.
Meta invested over $10 billion in its Reality Labs division as it looks to pivot into the metaverse, but the venture is yet to pay off as the metaverse is still in its early stages.
The company warned investors that its results might be below those of previous years driven by recent changes such as Apple’s new privacy features that make it difficult for advertisers to target iPhone users.
Many investors are scared that the social media giants growth days are over, and it has now entered a downtrend that will worsen with time.
Facebook faces stiff competition from emerging social media platforms such as TikTok, attracting many young users from its platforms, including Instagram and Whatsapp.
The company is still heavily reliant on advertising revenues, and with its various businesses dealing with multiple headwinds, the path ahead is full of hurdles.
On a positive note, Meta still has over 1.9 billion users on its platforms and could still find innovative ways to monetise this massive audience in future. Furthermore, the company can sell any new products to one of the largest global audiences available to any company.
All is not lost for Meta Platforms, but the path ahead is full of uncertainties from multiple quarters. So while some investors have been buying Meta shares following the recent selloff, I would hold off from buying until there are signs that the worst is over for the firm.
I would wait for the next quarterly earnings results to gauge if there are any improvements before jumping in.
*This is not investment advice. Always do your due diligence before making investment decisions.
Meta share price.
Meta Platforms share price has fallen 31% this year after disappointing results. So what is next for the firm?
