Meta Platforms Reaches New Highs Amid Strong Advertising Growth

Meta Platforms achieves record stock prices with a robust ad business, raising investor questions about the metaverse's future viability. Should you buy or hold?

Date: 29-03-2025

AI Rating: 7

Solid Revenue Growth
Meta Platforms has demonstrated a remarkable recovery, achieving revenue growth of 22% year-over-year and an impressive 39% increase in operational income. In 2023, the company generated $133 billion in revenue alongside $63 billion in operating profit, indicating a solid comeback from previous stagnant performance.

Advertising Business Success
The growth of Meta's advertising business, buoyed by increased ad pricing and ad impressions (rising 10% and 11% respectively), shows the resilience of its core operations. This growth not only supports the current stock valuation but positions Meta favorably for future earnings, especially with an engaged user base of 3.35 billion daily active users.

Mental Questions Around Metaverse Investment
Conversely, Meta's investment in the metaverse, through Reality Labs, has proven to be troublesome. Operating losses ballooned to $18 billion, while revenues remained stagnant at $2 billion. Such losses could undermine the company's robust advertising profits over time, raising concerns about sustained profitability while this division remains unprofitable.

High Valuation Risks
Currently, Meta's price-to-earnings (P/E) ratio stands at 28. Although high valuations can be justified by strong growth prospects, the question of whether the stock poses a bargain remains contentious. This high valuation adds risk as it limits upside potential while exposing investors to downside risks should growth not continue.

Investor Sentiment
Although the company has shown significant improvement in its core business, the reality of its metaverse investment presents a dilemma for investors that could affect stock price. The recommendation to hold rather than buy indicates caution at its current valuation, considering the ongoing operational losses in the metaverse.

Stocks: META