Has Facebook passed its peak? Or are the best days yet to come for the social media platform and its parent Meta (NASDAQ: META)? The answer to that question will be important in determining the future performance of Meta shares.
A decade ago, Facebook was popular. But investors were concerned that its recent billion dollar takeover of Instagram was an expensive mistake.
So, if 10 years ago I had put £500 into Meta shares (or Facebook as the corporation was then), how would I have done?
Meta shares have soared
In short, very well.
During that period, the price of Meta shares has increased by 662%. That means the shares that cost me £500 a decade ago would now be worth over £3,300.
This reflects a recent recovery in the Meta share price, which has more than doubled since November. But it remains at less than half of its September 2021 peak. So although my investment would show a very healthy return now, if I had sold out in 2021 I could have earned over £6,000 in profit for my initial £500 stake. That is an outstanding return!
Long-term outlook
But market timing is difficult to get right at best, if not downright impossible.
Back in 2021, nobody knew that Meta shares had peaked. Similarly, last November nobody knew that the shares would double over the next several months.
I missed the opportunity to invest in Meta a decade ago. Since then, a lot has changed. Indeed, the change of corporate name highlights how the company is trying to position itself for an evolving future digital landscape. So far that strategy has been costly and remains unproven. That helps explain why Meta shares fell steeply between their 2021 peak and last November.
Would I invest now?
I remain unconvinced about the firm’s long-term strategy. The metaverse has so far had limited appeal for mass-market users but Meta has spent massively on it nonetheless.
Meanwhile, social media platforms like TikTok continue to threaten user growth at Facebook. I see that as a risk to revenues and profits at Meta. That said, while revenue last year slipped 1% and net income fell 41%, it still came in at $23.2bn. Meta has confounded its sceptics before and the Instagram takeover looks like a masterstroke just over a decade on. But that does not mean it will necessarily do so again in future.
Meanwhile, the firm has been helping to fund future plans by ploughing profits back into the business rather than paying dividends. This means that from my initial £500 investment, the increase in value of a little over £2,800 in the past decade would represent all of my return from the shares. Still, that is a superb performance even with no dividends.
I’m not buying
Meta remains a force to be reckoned with. Its digital platforms continue to command huge user numbers in aggregate. The company remains massively profitable despite its challenges.
But I remain unconvinced that its future will be as bright as its recent past. I also think its offering has contributed to a wide range of social problems so Meta does not meet my own standards for socially responsible investing.
Despite excellent performance over the past decade, I will not be buying the shares for my portfolio.
