Looking at the shares of Facebook (NASDAQ:FB) ahead of the Meta-morphosis, it would appear that a name change and corporate rebrand are just what the company needed.
FB stock has risen nearly 10% since the Menlo Park, California-based company announced on Oct. 28 that it is changing its name to “Meta Platforms” and adopted a new corporate logo that is similar to the symbol for infinity.
The company, which continues to be run by Facebook founder Mark Zuckerberg (that’s not changing), is also changing its attention to focus on the so called “Metaverse,” which is a hypothetical virtual reality space in which people interact with each other through a computer generated environment.
Going forward, the social network that is Facebook will be one of many companies and brands under the corporate umbrella of Meta.
Facebook officially becomes Meta on Dec. 1 and the company’s stock ticker symbol will change to “MVRS” from “FB.” However, the stock already appears to be benefiting from the name change and rebrand, rising from the doldrums after a difficult period in which the company was seemingly attacked from all sides for a variety of ethical transgressions.
So with the share price climbing, is it worth buying FB stock as it prepares to morph into its new Meta identity?
Building On Success
Facebook is a bit of a two-headed monster. On one hand it is the social media platform that is reviled for spreading misinformation, sowing political descent and enabling online bullying.
On the other hand, Facebook is a cash cow when it comes to online advertising. With 3.58 billion monthly active users across its suite of apps that includes Facebook, Instagram, Messenger and WhatsApp, the company commands top dollar from advertisers all over the world. The vast majority of Facebook’s revenue comes from online advertising, and in this year’s third quarter, that revenue rose 35% from a year earlier, while its net income climbed 17% higher to $9.2 billion from $7.8 billion a year ago.
That kind of growth, along with a recently announced $50 billion stock buyback program, are the reasons why investors have been willing to look past the criticisms levied at Facebook, most recently the accusations made by former employee-turned-whistleblower, Frances Haugen, who testified before the U.S. Senate that Facebook is well aware of the harms its apps and services cause online but has declined to address them for fear of hurting its growth and share price.
The rebrand into Meta is an obvious effort by Facebook to distance itself from such criticisms and expand on its success to become more than a social media platform that attracts advertising dollars.
To be sure, there is a lot going on at Facebook beyond the social media network that it is best known for among the public. In addition to Instagram, WhatsApp and Messenger, Facebook also owns Oculus, which makes popular virtual reality headsets and on which Facebook plans to spearhead creation of the metaverse under its new moniker.
To that end, the company has said it will spend $10 billion over the next year developing technologies needed to build the metaverse that is essentially a virtual reality environment where people work, play and interact in a virtual world.
When introducing its new name, Facebook showcased a number of new products and gadgets that include a virtual reality headset named “Project Cambria,” artificial reality smart glasses called “Project Nazare,” and a line of video-calling devices. The company even rolled out a demonstration of what it sees the metaverse eventually becoming.
Media who were in attendance at the rebranding event described the demo as a “Pixar-like animation” that showed users hanging out as cartoon versions of themselves or as robots and other fantastical characters. While some journalists criticized the presentation, it’s clear that Meta will be more than just Facebook with a new name and corporate logo.
Buy FB Stock For Its Gains
Regardless of what you might think of Facebook’s influence and practices on social media, there is no denying that the company is a cash cow and incredibly successful. As an organization, Facebook has the resources to move beyond its social media roots and expand into new and exciting areas, notably virtual reality where it sees the future unfolding in coming years.
As Meta, the company will be able to grow into new ventures funded by the advertising dollars generated from Facebook. It’s an approach that investors seem to be embracing judging from the recent increase in the stock price.
For these reasons, investors should take a position in Facebook, focusing on the gains to be had rather than the ills caused by social media. FB stock is a buy.
On the date of publication, Joel Baglole held a long position in FB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.