Meta Platforms Faces Potential Growth Amid TikTok Ban Speculations

Recently, Meta Platforms(NASDAQ: META) has seen TikTok as its primary competitor. Meta’s strategy has included launching Instagram Reels, mimicking TikTok’s popular short video format. Should TikTok be banned in the U.S., Meta stands to gain significantly with increased user activity on Instagram and a boost in advertising revenue.

While this situation could present new growth opportunities, it also highlights a significant ongoing risk: rising competition in the social media space.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Impacts of a Possible TikTok Ban on Meta’s Revenue

The potential for a TikTok ban could be realized as soon as next month. If enacted, TikTok would no longer be available for download, although users with the app already installed could continue using it without updates. However, over time, this lack of updates might cause functionality issues.

The U.S. government has expressed concerns about TikTok’s ties to the Chinese government, leading to demands for the app’s sale to a non-Chinese company. A deadline of January 19, 2025, has been set, with the app facing removal from stores if not sold by then.

For Meta, TikTok’s disappearance would reduce competition in the U.S. market significantly. Advertisers would likely redirect their spending towards Meta’s platforms, increasing revenues.

The company is already performing well, with its Family of Apps—comprising Facebook, Instagram, Messenger, and WhatsApp—bringing in $115 billion in sales during the first nine months of 2024. This represents a year-over-year growth of over 22%, suggesting that further growth could elevate the stock’s appeal for investors next year.

Competitive Landscape Raises Concerns for Meta

Eliminating a major competitor would benefit Meta, yet it also underlines a critical vulnerability: the company’s ability to face serious competition. Data from Pew Research indicates that only 32% of U.S. teens use Facebook, and 23% use WhatsApp, while 61% use Instagram—just behind TikTok at 63%, even with the looming threat of a ban.

Meta often resorts to recreating features from other popular platforms, a strategy that allows them to keep up but also exposes them to risks from new competitors. Their recent launch of Threads, similar to X (formerly Twitter), has not resonated well with younger users, with only 6% of teens reporting usage compared to 17% for X.

The company struggles to capture the younger demographic’s attention outside of Instagram. Success among younger users can predict future performance, as many stick to their preferred platforms long-term. As new contenders like Reddit and the gaming platform Roblox develop their advertising capabilities, Meta might face challenges in appealing to this crucial audience even if TikTok disappears.

Assessing the Value of Meta Platforms Stock

As of Monday, Meta Platforms stock has surged over 76% in 2024, fueled by optimism surrounding a potential TikTok ban. However, this surging stock price raises questions about its sustainability.

Currently, Meta’s stock trades at over 29 times its trailing earnings, a figure that may increase if economic conditions falter and companies reduce their advertising budgets. Although the stock is at a record high, the market might have overvalued it, indicating a potential market correction that could make now an unwise time to buy.

Concerns about the company’s reliance on imitating others and lack of innovation suggest that Meta may not remain a favorite among advertisers in the long run. With increasing competition, the elevated stock valuation adds to the rationale for caution in any investment decisions.

A Second Chance to Invest Wisely

Have you ever felt like you missed exciting investment opportunities? It’s crucial to keep a lookout for new chances.

On rare occasions, our team of experts issues a “Double Down” stock recommendation for companies they believe are poised for significant growth. If you think you’ve missed the boat, investing now could prove beneficial. Here’s a glimpse at past performers:

• Nvidia: If you invested $1,000 when we doubled down in 2009, you’d have $334,266!*
• Apple: If you invested $1,000 when we doubled down in 2008, you’d have $46,976!*
• Netflix: If you invested $1,000 when we doubled down in 2004, you’d have $479,727!*

We are currently issuing “Double Down” alerts for three outstanding companies, and opportunities like this are rare.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 16, 2024

Randi Zuckerberg, former director of market development at Facebook and sister of CEO Mark Zuckerberg, serves on The Motley Fool’s board. David Jagielski holds no positions in any of the stocks referenced. The Motley Fool has investments in and recommends Meta Platforms and Roblox. They maintain a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.