HomeMost PopularWhere Will Meta Platforms Be in 5 Years?

Where Will Meta Platforms Be in 5 Years?

Actionable Trade Ideas

always free

In the past five years, shares of Meta Platforms (NASDAQ: META) have climbed 149%. Thatโ€™s a solid return although it has been anything but a smooth ride. Shares tanked 64% in 2022 as investors became overly pessimistic about the companyโ€™s prospects.

Where will this โ€œMagnificent Sevenโ€ stock be in five years? To come up with an educated guess, I think itโ€™s worthwhile to consider what could change and what will stay the same.

A social media powerhouse

During the three-month period that ended March 31, Meta reported having 3.24 billion daily active users across its family of apps. That includes some of the worldโ€™s most popular social media services, like Facebook, Instagram, WhatsApp, and Messenger. That user base, while already gargantuan, expanded by 7% year over year.

Even though Meta is a daily part of the lives of 40% of the worldโ€™s population, thereโ€™s no reason to believe that in 2029, it wonโ€™t still be a massive social media enterprise. Consequently, this means the business will probably still generate the bulk of its revenue from digital advertising.

In 2023, 98% of sales, or a whopping $132 billion, came from digital-ad efforts, putting Meta squarely behind Alphabet on the industry leaderboard.

The management teamโ€™s focus on investing heavily in artificial intelligence (AI) initiatives is a strategy that should bear fruit over time. Users of the various apps can interact with Meta AI that improves the experience and makes it easier to find the information theyโ€™re looking for. This could drive higher engagement.

Moreover, Meta has already launched generative AI features to better serve its advertising customers. There are claims being made that these tools could boost return on spend and cut down on labor hours. As advertisers view Meta as an invaluable partner, more ad dollars could flow its way.

A new world

Founder and CEO Mark Zuckerberg is always thinking about what comes next. He deserves tremendous credit for building Meta into a trillion-dollar company in about 20 yearsโ€™ time. But investors are skeptical about where his head is at now.

This relates to Metaโ€™s metaverse ambitions. The company already sells augmented reality glasses and virtual reality headsets that allow users to interact with the world and each other in new ways. โ€œZuckโ€ is trying to build the next major computing platform.

The issue, though, is that these offerings arenโ€™t catching on. In the past 12 months, its Reality Labs business only generated a total of $2 billion in revenue. That barely moves the needle for Meta. Itโ€™s been consistently losing huge amounts of money. Just in the last quarter, it posted an operating loss of $3.8 billion.

Zuckerberg hopes there will be 1 billion people using metaverse-related products and services one day. But based on the latest trends, itโ€™s difficult to see this happening anytime soon. Iโ€™d bet that even if Reality Labs really takes off, it will pale in comparison to the family of apps in terms of how they influence the companyโ€™s financials.

Meta has optionality, but itโ€™s still a digital-ad enterprise at heart.

Buy Meta stock

There are very few businesses that can invest so aggressively behind unproven technologies, while still producing incredibly high margins and earnings. Even if Reality Labs becomes a flop, the core social media and digital-ad operations are so lucrative in their own right.

And this warrants a closer look from investors. Shares have skyrocketed 289% since the start of 2023. But they trade at a reasonably forward price-to-earnings (P/E) ratio of 26.7. This looks like a smart investment to buy and hold for the next five years.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy nowโ€ฆ and Meta Platforms wasnโ€™t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005โ€ฆ if you invested $1,000 at the time of our recommendation, youโ€™d have $579,803!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks ยป

*Stock Advisor returns as of May 13, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Foolโ€™s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Foolโ€™s board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.

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

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.