Meta Platforms (NASDAQ:META) stock has seen a more-than 170% this year. With a focus on social media profitability and AI integration, this stock has gained momentum. Consumers and investors responded positively to the company’s introduction of the Quest 3 VR headset, generative AI chatbots, and updated Ray-Ban smart glasses.
The company reported strong results and has done so in past quarters. In Q3, Meta reported a robust 23% revenue growth, marking its fastest pace in two years, driven by the recovering online ads market.While the company has been having excellent financials and growth, the bears are still finding some loopholes that can drag the stock down. Let’s delve into the bear and bull case for META.
The Bull Case
Meta Platforms’ stock surged 181% in 2023, reaching a $868 billion market cap. Another 15% jump would propel it to the $1 trillion mark. Meta’s revenue increased 12% YoY to $94.8 billion in the first nine months of 2023.
If Meta hits $168 billion in 2025 revenue and maintains a five-year average price-to-sales ratio of 7.5, it could reach a $1.26 trillion market cap in three years. This potential is driven by the digital ad market’s anticipated growth to $1.26 trillion by 2032, with Meta holding a 23% share based on 2022 estimates.
Sustaining rapid growth, Meta’s expanding user base, reaching nearly 4 billion monthly active users in Q3, aligns with the digital ad market. With AI tools enhancing ad effectiveness, Meta’s potential to surpass $1 trillion valuation is evident, foreshadowing substantial growth.
The Bear Case
On the bearish side, Meta Platforms currently faces allegations for its ad-free subscription in Europe. The European Consumer Organisation (BEUC) and 18 affiliates lodged a complaint alleging it violates EU consumer laws. This follows NOYB’s privacy complaint to the Austrian watchdog, equating the service to privacy payment.
Meta introduced a paid ad-free subscription for Facebook and Instagram, aiming to align with EU regulations on user data choice. BEUC accused Meta of violating EU consumer laws through unfair practices, including pressuring users and providing inadequate information, according to BEUC Deputy Director General Ursula Pachl.
This puts Meta Platforms in a bit of a bad shade, but investors believe this will just affect in the short-term.
The Verdict
Despite legal challenges, both bullish and bearish arguments exist for Meta Platforms. The company faces litigation, yet long-term market cap growth is expected. The ongoing tug-of-war between bulls and bears adds complexity to this outlook.
Choose your stance now. If bullish, holding META stock through at least the end of 2023 is recommended. While challenges persist, Meta Platforms is expected to endure and sustain robust revenue in the foreseeable future.
On the date of publication, Chris MacDonald has a LONG position in META. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
