Meta Platforms, Inc. (NASDAQ:FB) stock has left its investors wondering to like or not to like the stock in 2022? Having losses of nearly 39% in 2022 after a disappointing fourth-quarter 2021 earnings report is not a light issue for one of the top social media platforms worldwide. Before deciding whether buying the dip is a good idea or an immature investment decision as the bottom for FB stock could be much lower amid a turmoil of geopolitical risks — here are some key points to consider now. The world has changed as of Feb. 24, 2021.
Back in January 2021, my article titled “Facebook Stock Has One Major Like, But Plenty of Dislikes” highlighted a like for the dominant position of Facebook among other social media platforms and a few dislikes, namely the spread of “fake news”, a growth that could reach saturation levels, competition from other platforms such as TikTok, an antitrust case, an advertising boycott and mostly a slowdown in key financial metrics.
The conclusion was “Now’s the time to be very hesitant about Facebook stock.” I wrote that the world has changed as we know it. On Feb. 24, Russia decided to invade Ukraine. This unprecedented action has numerous implications on society, the economy, and as expected on shares of Meta Platforms.
Investors who love stats can argue that after a week of Russia invading Ukraine, FB stock is nearly unchanged, having minor losses of less than 2%. On the contrary, FB stock has had a significant loss of nearly 41% in the past 3-month period.
Could the selling pressure be ending or an accumulation of the stock near $205 a share occur now? It is probably but it is just a scenario. There are now two major catalysts for FB stock after a disappointing Q4 2021 earnings report.
February 2, 2022, A Date Meta Platforms Wants to Forget
FB stock plunged 20% after-hours due to disappointing earnings, weak guidance, and a slowdown in user growth.
Remember that in my article on January 2021 I wrote “the five-year trend for sales growth, pretax income growth, net income growth, earnings-per-share (EPS) and EBITDA is declining. That’s not in absolute numbers, but in growth.”
Both Daily Active Users (DAUs) and Monthly Active Users (MAUs) were lower than expected. This trend is too important for marketers, advertisers, and investors. Businesses want to spend money for advertising on hot social media platforms.
TikTok has gained popularity and is most attractive for advertising to a younger audience. A continued slowdown to daily and monthly active users should be negative news for the profitability of Meta Platforms.
I am now concerned about the war in Ukraine as it could have a long-term negative impact on Meta Platforms’ revenue growth.
Restricted Access to Russian Media Outlets Mean for Meta
Facebook announced that it has restricted “access to RT and Sputnik across the EU” and that is “now globally demoting content from Facebook Pages and Instagram accounts from Russian state-controlled media outlets and making them harder to find across our platforms.”
The ban of ads from Russian state media on its website will lead to lower revenue for sure, but this is not the only “battle” Facebook has to fight. A global boycott against Russian products would naturally lead to lower advertising campaigns for Facebook.
While Ukrainians fight for survival, Facebook must deal with the “battle” of misinformation, transparency, and propaganda in this war. Facebook has reacted quickly and with responsibility adding safety features in Ukraine and Russia and assuring people it is taking extensive steps to fight misinformation.
If history provides valuable lessons, then Facebook must have learned from the whistleblower’s testimony and accusations on Facebook’s user base and its record on human rights.
What is trivial now is Facebook’s impact on society on a global basis. In a war that should never occur, “fake news” and losing revenue as sanctions from the West to Russia are both equally important for Facebook.
The Bottom Line
The silver lining is that Facebook can set the example in this war, set higher and more strict standards and rules about what is social media about in the first place. Hopefully, the war will end as soon as possible, and stock prices should rebound. Meantime history is written daily.
Facebook can find ways to address this expected revenue decline. The answer may not be in the metaverse though. The war is a real thing, human casualties are unfortunately real too, so investors should be prepared for a likely tough next quarterly earnings report.
It is time for Facebook to show its dominance as the largest social media platform is not just about profits and user numbers, it is also about being a leader in all possible good ways on how social media impacts our daily lives.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
