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A TIKTOK BAN WOULD BE GREAT NEWS FOR META PLATFORMS, BUT IT ALSO HIGHLIGHTS A
HUGE RISK

By David Jagielski – Dec 19, 2024 at 6:30AM

Key Points

 * A TikTok ban could go into effect next year, which may lead to more revenue
   growth for Meta Platforms.
 * The company's applications, outside of Instagram, aren't all that popular
   with teens.
 * A lack of innovation from the company could raise flags for growth investors.
 * Buy Alert: Our 10 best stocks to buy right now (see the list)

STOCKS MENTIONED

META
Meta Platforms
$607.75
Arrow-Thin-Down
(+1.3%)
+$7.90


NASDAQ: META


META PLATFORMS



Market Cap
$1,534B

Today's Change
Arrow-Thin-Down
(1.32%) $7.90
Current Price
$607.75
Price as of December 24, 2024, 1:00 p.m. ET


In recent years, the biggest threat for Meta Platforms (META 1.32%) has been
TikTok. Meta's response to that has been its Instagram Reels, which allows users
to easily scroll through quick videos just as they would with TikTok. Now, if
TikTok ends up getting banned in the U.S., Meta could stand to benefit on
multiple fronts: More users moving onto Instagram, and more ad dollars coming
its way.

It could set the business up for some great growth opportunities, but it also
reminds investors of a big risk facing the company over the long haul: Rising
competition.

Arrows-In Collapse



NASDAQ: META

Meta Platforms
Today's Change
(1.32%) ‏7.90 ‏$
Current Price
‏607.75 ‏$
Arrow-Thin-Down
YTD
+76.17%
1w1m3m6m1y5y
Price VS S&P
META


KEY DATA POINTS

Market Cap
$1,534B
Day's Range
‏599.28 ‏$ - ‏607.99 ‏$
52wk Range
‏340.01 ‏$ - ‏638.40 ‏$
Volume
4,713,445
Avg Vol
12,388,259
Gross Margin
81.50%
Dividend Yield
0.33%


MORE REVENUE GROWTH COMING META'S WAY?

A ban on TikTok could happen as early as next month. What it would mean is that
the social media application won't be available for download from app stores.
Users would still be able to technically use the application if they have it
installed on their phones already, but without any updates, it could eventually
stop working properly.

The U.S. government, citing fears of Chinese government involvement with the
app, wants TikTok to be sold to a company outside of China. A deadline is in
place for Jan. 19, 2025, and if TikTok isn't sold by then, the app could be
swiftly removed from app stores.

For Meta, that would effectively almost eliminate a serious competitor in the
U.S. market. Meta could be a big benefactor of the ban as advertisers, with
fewer ways to reach U.S. audiences, may be inclined to spend more money
advertising on Meta's social media applications.



Business is already going fairly well for Meta. Its Family of Apps segment
(which includes Facebook, Instagram, Messenger, and WhatsApp) generated $115
billion in sales through the first nine months of 2024, which is a
year-over-year increase of more than 22%. A faster growth rate could make the
stock an even hotter buy next year.


THE TIKTOK BAN UNDERSCORES A BIG CONCERN FOR META INVESTORS

Getting rid of a big rival would undoubtedly be great news for Meta, but the
stock surging in value due to this also highlights an underlying concern: Its
applications may not be able to withstand serious competitors. According to a
recent survey of U.S. teens, data from Pew Research shows that just 32% of teens
use Facebook, while 23% use WhatsApp. The percentage rises to 61% for Instagram,
which is still lower than TikTok at 63% -- and this is even as the threat of a
ban is hovering over it.


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Meta's strategy often relies heavily on copying other platforms. This reactive
approach can help it play catch-up with new or better apps, but it means it may
also be vulnerable should a new threat emerge. Even copying competitors hasn't
necessarily led to surefire success. Meta created Threads in 2023, which is
similar to X (formerly Twitter). But it doesn't appear to be resonating with
younger audiences either, with just 6% of teens saying they use the platform,
versus 17% who use X.

Outside of Instagram, the company struggled to win over young audiences. How it
does with that demographic can be a good predictor of how it will do in the
future, as many of these users may remain on their preferred social media
platforms for years. As Reddit develops its advertising business and gaming
platform Roblox works to offer unique advertising opportunities, advertisers
will have many more options to choose from in the future when targeting young
audiences, even if TikTok is banned. That could be a big problem for Meta.




IS META PLATFORMS STOCK A GOOD BUY?

As of Monday's close, Meta Platforms stock has risen by more than 76% in 2024.
It has been a red-hot stock, and a lot of that optimism is based on the
assumption that a TikTok ban will soon go into effect. Even if that looks like a
foregone conclusion at this point, that isn't enough to make it a slam-dunk buy.

Meta's stock is trading at more than 29 times its trailing earnings, but that
multiple may climb higher if economic conditions slow down next year and
companies scale back on advertising spending. The social media stock is at an
all-time high, and with perhaps too much optimism priced into its valuation, I
would hold off on investing in it today as a correction could be overdue.

Its lack of innovation and reliance on copying features and being a reactive
company is why I wouldn't be optimistic that Meta will be able to perform well
in the long run. I'm not convinced the company will be a top choice for
advertisers in the future, as Meta's platforms could struggle amid greater
competition. Its elevated valuation should provide investors with even more of a
reason to be cautious with the stock right now.


SHOULD YOU INVEST $1,000 IN META PLATFORMS RIGHT NOW?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are
the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of
them. The 10 stocks that made the cut could produce monster returns in the
coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000
at the time of our recommendation, you’d have $855,971!*

Now, it’s worth noting Stock Advisor’s total average return is 912% — a
market-crushing outperformance compared to 174% for the S&P 500.

Don’t let others invest while you stand on the sidelines.

See the 10 stocks



*Stock Advisor returns as of December 23, 2024





Randi Zuckerberg, a former director of market development and spokeswoman for
Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The
Motley Fool's board of directors. David Jagielski has no position in any of the
stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms
and Roblox. The Motley Fool has a disclosure policy.


MOTLEY FOOL ISSUES A.I. BUY ALERT

This tech could reach $80 trillion. Imagine a technology worth over 23 Nvidias.

What in the world could be worth 23 Nvidias? The answer is a radical tech
breakthrough that our experts think is transforming every walk of life. And this
giant leap forward has many on Wall Street very excited.

Learn more ›

Related Articles

1 Artificial Intelligence (AI) Stock to Buy and Hold Through 2025 and Beyond
Meta's Strategic Edge: Navigating Growth in a Matured Social Media Landscape
Best Stocks to Buy for 2025: Meta Stock vs. Snap Stock
3 Top Tech Stocks That Could Make You a Millionaire
The Best Stocks to Invest $50,000 in Right Now
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Motley Fool Returns

Market-beating stocks from our flagship service.

Stock Advisor Returns
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S&P 500 Returns
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Calculated by average return of all stock recommendations since inception of the
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Cumulative Growth of a $10,000 Investment in Stock Advisor

Calculated by Time-Weighted Return since 2002. Volatility profiles based on
trailing-three-year calculations of the standard deviation of service investment
returns.




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