How to Invest in Facebook (Meta) and Why
The relatively newly christened Meta Platforms is the parent company of Facebook, Instagram and WhatsApp, and is one of the largest companies in the world by market capitalisation. But is Meta a good stock to buy in 2024?
In this article, we will take a look at the prospect of investing in Meta Platforms before demonstrating how to buy Facebook shares.
Table of Contents
A Short History of Meta Platforms
What began as a site designed to connect people at Harvard University has evolved and spread around the globe. Before we take a look at how to invest in Facebook, let’s take a quick look at some of the highlights of its history.
- 2004: TheFacebook is launched by Mark Zuckerberg and fellow student Eduardo Saverin as a way for undergraduate students at Harvard University to connect.
- 2006: Facebook is made accessible to the general public.
- 2012: In April, Facebook acquires Instagram for $1 billion before going public via an Initial Public Offering (IPO) in May.
- 2013: Facebook shares added to the S&P 500.
- 2014: Acquisition of WhatsApp for $19 billion.
- 2021: Facebook rebrands to Meta Platforms signalling the company’s intent to pivot more towards developing the metaverse.
When you buy Facebook shares, you are essentially buying a part of the company. Therefore, before deciding whether or not to invest in Facebook, amongst other things, it is important to take a look at the company’s fundamentals, to understand how the company is performing and how it generates its income.
In the table below, we have highlighted some of the key indicators from the company’s earnings report for the third quarter of 2023.
|% Change YoY
|Earnings per Share (EPS)
|Daily Active People
|Monthly Active People
Source: Meta Platforms – Third Quarter 2023 Results
Meta Stock Analysis
For a long time, Facebook founder Mark Zuckerberg resisted taking the company public, whilst also rejecting a number of buyout offers.
By the time the company eventually did go public in 2012, it already reportedly had 845 million active monthly users and was valued by underwriters at more than $100 billion. At the time, this was the largest valuation for a newly public company ever.
Looking back over the last five years - following a string of scandals and other events in 2018, which caused share price to drop 26% - Meta Platforms’ share price continued its long-term upward trend. Despite a steep setback at the outset of the Covid-19 pandemic in 2020, Meta shares soared more than 160% in the three year period ending 31 December 2021.
However, things changed abruptly in 2022. Amidst a challenging economic environment - with soaring inflation, rising interest rates and an uncertain outlook – Meta shares plummeted 64%, hitting a seven year low in the process. This decline was far more profound than the wider S&P 500’s drop of 19% over the same time period.
Tough economic conditions meant advertisers reined in spending, hitting Meta’s earnings. Furthermore, at the beginning of the year, daily active users fell for the first time in the company’s history. But, all this aside, one of the things which spooked investors the most was how much money Zuckerberg and Meta were pouring into the metaverse.
|A $1,000 investment in the Facebook IPO in 2012 would have bought 26 shares at the IPO price of $38 a share. As of the market close on 22 November 2023, this position would be worth $8,878.74.
In 2022, losses emanating from Reality Labs, Meta’s metaverse segment, totalled $13.7 billion, down from $10.2 billion the previous year. At a time when revenue was broadly flat and inflation was pushing up operating expenses, burning this amount of cash was unpalatable to investors.
However, improving economic circumstances and earnings have helped Meta’s share price recover much of its lost ground in 2023, although it remains below its all-time high at the time of writing.
Nevertheless, rising revenue and lower costs have masked the fact that Reality Labs continues to be a drain on income. In the first nine months of 2023, the segment reported a loss of $11.5 billion, more than 20% deeper than the same period last year.
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Is Meta a Good Stock to Buy?
As with any investment, the answer to this question is going to come down each individual. Before making any investing decision, you should conduct your own research and consider what you are aiming to achieve from investing.
We have already noted how much money Meta is pumping into the metaverse. From the beginning of 2020 until 30 September 2023, Meta’s Reality Labs division has lost a total of $42 billion. That’s a lot of money.
If the metaverse ends up being a success, onlookers may reflect on this as money very well spent and hail Zuckerberg’s extraordinary vision. However, if it fails, it’s going to be an incredibly expensive mistake.
Looking beyond the black hole which is Reality Labs, one metric which really stands out in Meta’s earnings isn’t a financial one, but the number of people that use the company’s family of applications. On average, 3.14 billion people use one of these applications on a daily basis. On a monthly basis, that figure goes up to 3.96 billion.
Those numbers really are quite remarkable. Considering there are around 8 billion people on the planet, that means almost 50% of the world’s population use one of Meta Platforms’ applications on a monthly basis.
This explains then why Meta is such a desirable place for advertisers, and why it generates 18% of digital advertising revenue worldwide. The only other company in the world which boasts this kind of global reach is Google.
As long as Meta can continue to hold a captive audience of this size, it will be well-placed to benefit from increasing spending on digital advertising worldwide, which is forecast to hit $900 billion in 2028, up from $694 billion 2023.
How to Buy Facebook Shares
With an investing account from Admirals, you can buy Facebook shares and invest in more than 4,500 other companies from around the world. Follow these steps to get started:
- Open an Invest.MT5 account.
- Log in to the Dashboard.
- Click ‘Invest’ next to your account details to open the web trading platform.
- Search for Facebook stock and click the stock symbol to open a price chart.
- Press ‘Create New Order’, enter the number of Facebook shares you want to buy and click ‘Buy’!
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