This article is written exclusively for Investing.com
Stocks continue to rise
Embracing the Metaverse in 2022
Regulators have their sights on company and its CEO
On Both Sides of a Trillion Dollar Valuation
Betting against FB has been a mistake
When most people think of social media, you think of Facebook, whose company was recently rebranded as Meta Platforms (NASDAQ:). Facebook is 18 years old. Those who bought FB stock when it went public in May 2012 paid $42.05 and saw the stock's value more than halve after the IPO, reaching a low of $17.55 in September 2012.
Yet in late 2021, FB shares closed at $336.35, eight times the price at the May 2012 opening.
Facebook became a go-to platform for users, but the company's brilliance was its ability to monetize through advertisers. FB's access to data makes it one of the most valuable technology companies in the world. Meanwhile, that position also raises more than a few regulatory and privacy issues.
As we enter 2022, Facebook has embraced the metaverse as its next major project. The company even went so far as to change its name to reflect its new focus of becoming a leader in the network of 3D virtual worlds that it believes is the future of social connection. ]From a long-term perspective, FB shares remain in an upward trend at the end of January 2022.
Meta Platforms Monthly Chart.
Source: bar chart
Since FB's IPO ten years ago, its stock rose from a low of $17.55 to a high of $384.33 in September 2021. At just under $309 per share on Jan. 20% lower than the 2021 high, but the stock is still more than 16 times the price at the 2012 low.
FB Income and Profit Estimates.
Source: Yahoo (NASDAQ:) Finance
As the chart shows, FB has beaten analyst consensus in the past four consecutive quarters. FB will report earnings for the fourth quarter of 2021 on Wednesday, February 2, after the market closes and its current estimate of earnings per share is $3.84 per share. FB collects valuable data from its users and advertisers are willing to pay hefty fees to access its base.
A survey of 54 analysts by Investing.com has an average price target of $396.46 per share, with forecasts ranging from $147 to $466. The average forecast was nearly 32% above the January 24 price.
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Analyst consensus estimates polled by Investing.com.
Source: Investing.com
Embracing the metaverse in 2022
FB believes the metaverse is the future and has positioned the company as a leader in the 3D virtual world. Founder and CEO Mark Zuckerberg changed the company's name from Facebook to Meta Platforms in late 2021, as part of an effort to put FB at the center of human interaction in the metaverse.
He bets that this is the next step for technological advancement on social media. Metaverse aside, FB is working to break through the non-fungible token market of digital collectibles, a multi-billion dollar arena that will grow by leaps and bounds by 2022. Regulators Have Company And Its CEO In Crosshairs
FB and Zuckerberg have been at odds with Washington regulators for years. When the company attempted to release a cryptocurrency, Libra, Congress would not be part of the initiative. In a statement summarizing lawmakers' plans for the company, Connecticut Senator Richard Blumenthal recently said:
“Change is coming. No question. We take serious action. Here's my message to Mark Zuckerberg: Your days of invading our privacy, promoting toxic content, and preying on children and teens are over. Congress will take action.”
In the US Capitol, where Democrats and Republicans agree on next to nothing, there is a twofold agreement that FB has grown to a level where its power and access to data hinder competition and have other consequences. Recently, a federal judge cleared the way for the Federal Trade Commission to file a lawsuit to split FB after the company claimed the complaint should be dismissed. Several state attorneys general are investigating Meta's Oculus virtual reality group on antitrust issues.
FB faces tougher regulations or worse, as Congress could order the company to be wound up. Many regulators and government officials believe that Zuckerberg and FB have grown too big for their pants. $859 billion. When the stock rose to its all-time high in late 2021, the company's value moved above the $1 trillion mark, joining Apple (NASDAQ:), Microsoft (NASDAQ:), Saudi Aramco (SE:), Amazon (NASDAQ: ), Alphabet (NASDAQ 🙂 (NASDAQ:) and Tesla (NASDAQ:) in the elite trillion dollar club.
Most companies with a market cap of trillions of dollars are technology companies. But FB is in a unique situation overseen by the US and global regulators, as social media is a business that has a huge influence on people.
The higher FB's market cap, the more intensely the regulators will want to control the company. In many ways, this technology and social media company — and companies like it — have far more influence over people than government does, which is the root of Zuckerberg's problem with government officials.
In addition, in a Catch-22, advertisers cannot afford to ignore FB, as the company has built a ubiquitous addressable market with data and AI capabilities that are unsurpassed.
FB's position in the crosshairs of the government is nothing new. It has been in a controversial position for years, but earnings and stocks continue to rise. Betting against FB has been a tragic mistake for the past decade, despite the company's many PR missteps, bad press and repeated government investigations and hearings.
Even if Washington eventually had its way and broke up the company, the sum of its parts could be worth even more than the current whole.
Early 2022, the potential for rising interest rates weighed on all technology stocks, and Meta Platforms is no exception. However, technology is the future, and the metaverse is an area with huge profit potential.
All downdrafts in FB have yielded opportunities in recent years. In January 2020, FB shares rose to a new all-time high of $224.20 before the global pandemic sent the stock to a low of $137.10 in March 2020. At its most recent high in September 2021, FB shares were more than 2.8 times higher than the 2020 low
The sum of the parts of FB offshoots may eventually become worth even more than the peak valuation of the single company if Washington breaks the Meta Platforms into pieces. Advertising is the bread and butter of FB. The technology is likely prepared for whatever Washington decides the future regulation is, as programmers and the brains behind the technology are way ahead of government legislators.
FB and the technology sector underwent sharp corrections in early 2022. However, the profit potential these companies can generate remains a major reason why they will bottom out sooner rather than later.
