Meta Platforms (NASDAQ: META) has been one of the hottest growth stocks to own in recent years. Since the beginning of 2023, it has skyrocketed by around 490%, turning a $10,000 investment into nearly $59,000. The social media stock has gone from being the stock seemingly no one wanted to own in 2022 to now becoming one of the most valuable companies in the world, with a market cap of close to $1.8 trillion.
The business has been doing well, and bullishness remains high for the stock. Can Meta Platforms turn a $10,000 investment into $1 million or more?
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Why Meta can continue soaring
Meta has been experiencing some tremendous growth in recent years. Its highly popular social media apps, including Facebook, WhatsApp, and Instagram, attract billions of users. For marketers, that can make it incredibly enticing to advertise on those apps, as it’s easier to reach a specific target audience when potential customers are concentrated on a single platform.
The demand is evident, with Meta continuing to grow at a high rate. The company recently posted its year-end results for 2024, and revenue totaled $164.5 billion for the entire year, which is an increase of 22% from the previous year. What’s even more impressive is that the business grew its profits at an even faster rate of 59%, as net income totaled $62.4 billion.
Those are fantastic numbers for Meta. The company has amassed an impressive collection of social media assets into its organization, which ensures that it will do well as ad spending remains strong. And even though it has generated some mammoth gains in the past couple of years, it’s still not a terribly expensive stock, trading at almost 30 times its trailing earnings.
Why Meta might struggle
Meta has performed exceptionally well, but it’s not entirely a result of its own doing. It has benefited from factors outside of its control.
While the economy has been strong, many advertisers left X (previously known as Twitter) when Tesla CEO Elon Musk took over and put into place policies that loosened restrictions around the social media app. The U.S. government has also attempted to ban Meta’s biggest rival, TikTok. And with uncertainty still weighing over how that may play out, advertisers may be inclined to take the safer route and advertising on one of Meta’s apps.
If TikTok disappears from the U.S. market, a brand presence that a business may have been building up on that platform would effectively become limited in value. Advertising on one of Meta’s apps doesn’t involve taking on that risk.
This is why, although Meta has been doing well, I’m not convinced it can do well amid some real competition. In the future, there will inevitably be more options for advertisers to turn to.
Meta’s best assets are also arguably the ones it acquired — WhatsApp and Instagram. The company has relied on growing its business by copying popular features from other apps and making acquisitions. Innovation hasn’t been its strength, which is why I believe the social media company may struggle in the years ahead.
Meta doesn’t look like a 10x investment, let alone 100x
For Meta’s stock to turn a $10,000 investment into $1 million, it would need to grow to 100 times its original value. That means its market cap would one day need to top $180 trillion. Given its elevated valuation, I don’t see that as being a likely scenario. Even getting to 10 times its value, to more than $18 trillion, might be a long shot.
Meta has been a good buy in recent years, but investors may want to temper their expectations moving forward. The company has benefited from the looming TikTok ban and X’s controversial policies. However, as it inevitably faces greater competition in the future, I think the business won’t be nearly as attractive of an investment as it may appear to be today.
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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 Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Tesla. 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.
