FB Stock: Meta threats could catch up to it in 2022
With Meta-platforms (NASDAQ:FB) stocks facing dangerous threats and unlikely to generate big returns for investors over the next couple of years, I don’t think stocks are a buy for any type of investor in the medium to long term. Meta Platforms is the company formerly known as Facebook.
The company’s most recent public relations nightmares, the advent of the social media company partially owned by former President Donald Trump, and continued sanctions threats by multiple governments are among the biggest risks facing the action. FB is facing.
Meanwhile, the company’s metaverse plans are unlikely to move the equity needle for several years, if ever.
PR nightmares and Trump’s adventure
Some say it’s very difficult for Facebook to determine what content to censor. Ads about human trafficking, however, should obviously be removed, but it emerged this year that the social media giant has failed to do so on a large scale.
The revelations by former Facebook employee Frances Haugen are also very disturbing, showing that the company has chosen not to take decisive action against content it knew to have “a serious impact on public health“, under the terms of The Guardian.
I think as this information is internalized by consumers and advertisers, a significant number of them may shy away from Meta websites. Such a phenomenon would undermine the company’s financial results, hampering the switch to FB action.
Conversely, among right-wing and populist Americans, I think Meta’s image has already been irreparably damaged. Society’s almost universal censorship of any information about the coronavirus that was not in line with US government positions, such as the “lab leak” theory that turned out to have at least some validity, has left many, if not most, on the right side quite angry with the company.
And Facebook’s censorship of negative information about Hunter Biden’s laptop ahead of the 2020 election. Trump supporters are also unhappy with the huge donations by Meta CEO Mark Zuckerberg to organizations that sought to increase turnout only. in predominantly pro-democratic regions and which have convinced municipalities to hire many eagerly pro-democratic election workers.
Finally, of course, Facebook’s decision to ban Trump’s account didn’t appeal to many, if not most of its constituents.
Given the dissatisfaction of most Trump voters with Zuckerberg and Facebook, I think the former president’s next social media venture called Truth Social, could significantly reduce levels of Facebook usage in the United States. Such a phenomenon, in turn, could very well have a significant negative impact on the FB stock.
Trump Media and Technology Group, which creates Truth Social, announced a proposed merger, a SPAC called Digital world acquisition company. (NASDAQ:DWAC). I own shares in the latter company.
Governments Still Go After Meta
Various governments and regulators are still looking to punish the company formerly known as Facebook. For example, in October, Meta said it would face government investigations triggered by the disclosures from Haugen, the whistleblower.
Meanwhile, the Federal Trade Commission is still trying to force Meta to sell Instagram and WhatsApp.
And the EU recently took an important step in allowing consumer groups to sue the company. Finally, there are several signs that, following Haugen’s testimony, the company will face increased pressure from Washington.
The Metaverse will be far from a Slam Dunk for Meta platforms
Zuckerberg said the metaverse will not generate a profit for the company in the near future. Additionally, the CEO indicated that e-commerce is a key part of Meta’s metaverse strategy. But Facebook has tried – and, for the most part, failed – to become a major player in e-commerce for many years.
In addition, the company faces strong competition in the sector; According to one article, there are already at least 160 companies in space.
And finally, the Metaverse has been around for a very long time, without generating much revenue. I remember hearing about companies with metaverse-type ideas about 20 years ago. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), with Google Glass, Microsoft (NASDAQ:MSFT), with HoloLens, and Facebook, with Oculus, have tried to release devices that allow metaverse-type experiences. None of these products have been very successful, and Google Glass has all but disappeared.
The result on FB Stock
In Meta’s own words, its core advertising business faces “significant uncertainty” among the privacy changes implemented by Apple (NASDAQ:AAPL). I’ve warned in recent years that these changes could negatively impact Facebook’s bottom line.
Meanwhile, the Metaverse will not be profitable for a while, and at the best of times its revenue growth will move Meta’s revenue needle in a few years. Considering these elements, it is highly unlikely that Meta’s revenue and profit growth will surpass the S&P 500 increases on average, making stocks unsuitable for growth investors.
And, as I showed above, due to its PR issues, government interference, and Trump’s social network, the company faces big risks. I think this makes stocks inappropriate for conservative investors.
Would I be shocked if the FB title, despite all of this, still manages to slightly outperform the Nasdaq and the S&P, while “the jackpot” continues to reflexively press the buy button of the name? Not at all.
But I think there are dozens of stocks with much better risk / reward ratios than Meta at this point.
As of the publication date, Larry Ramer held a long position in DWAC. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Larry Ramer has researched and written articles on US equities for 14 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing articles for InvestorPlace in 2015. Some of his highly successful contrarian picks include GE, Solar Stocks, and Snap. You can reach him on StockTwits at @larryramer.