Meta Platforms (NASDAQ:META) has a number of threats to contend with, including regulatory resistance from the European Data Protection Board. Yet, the biggest threat of all might come from a famous electric vehicle (EV) manufacturing mogul. Overall, I still like the growth prospects for META stock, but investors should consider Meta Platforms’ challenges.
I must admit, Meta Platforms is actually making some progress with regulators in Europe. Still, the company will undoubtedly continue to face pushback from regulatory entities in Europe as well as in the U.S.
Furthermore, that’s not Meta Platforms’ only problem. So, get ready for a war between the META stock buyers and sellers, and don’t invest too much as the battle could get really intense.
META Stock: Weighing the Pros and the Cons
It’s easy to see why Meta Platforms is a “Magnificent Seven” company. It’s a social media juggernaut that rakes in massive revenue from its popular apps.
Impressively, Meta Platforms third-quarter 2023 advertising revenue jumped 23.5% to $33.64 billion, versus $27.24 billion in the year-earlier quarter. Moreover, the company fulfilled CEO Mark Zuckerberg’s “year of efficiency” commitment as Meta Platforms reduced its costs and expenses by 7%.
On the other hand, Meta Platforms’ Reality Labs division, which developed the Quest 3 virtual reality (VR) headset, continues to lose money rapidly. Zuckerberg called the metaverse the “next frontier,” but it hasn’t been lucrative for Meta Platforms so far. Believe it or not, Reality labs lost $3.7 billion in 2023’s third quarter and has lost $21 billion since the beginning of 2022.
In addition, it remains to be seen whether Meta Platforms is making a smart move by charging for advertisement-free versions of Facebook and Instagram in Europe. This seems like a good idea, as it will offer Meta Platforms another potential revenue source. Going forward, META stock investors should look for evidence that Meta Platforms is succeeding with ad-free Facebook and Instagram experiences.
Watch Out, Mark! Elon Is Coming for You.
If you’re waiting for a cage fighting match between Zuckerberg and Tesla (NASDAQ:TSLA) CEO Elon Musk, don’t hold your breath. However, there’s definitely a virtual war underway between the two chief executives.
Musk also owns X (formerly known as Twitter), and this app directly competes with Meta Platforms’ Threads. Now, Musk is making it crystal clear that he wants to turn X into the Tesla of social media platforms.
If Musk has his way, social media users will stay on X and never leave it to use any of Meta Platforms’ apps. Reportedly, Musk wants to evolve X into an “everything app” with subscription models not unlike what Meta Platforms is now doing in Europe.
Could X, if it truly becomes an all-in-one super-app, really threaten Meta Platforms? Musk seems to suggest that the threat is real, as he apparently wants to combine the functionalities of social networking, shopping and payments into X.
For example, Musk indicated that he wants X to serve all personal-finance needs for its users. “If it involves money. It’ll be on our platform,” Musk was reported as saying.
Additionally, Musk even envisions X becoming a “fully fledged” dating site in 2024. Thus, some people who use Facebook and Instagram to find romance might eventually switch to X. It’s hard to imagine this happening now, but Meta Platforms’ investors shouldn’t underestimate Musk’s vision and competitive drive.
Let the META Stock Bulls and Bears Battle It Out
Musk and X aren’t going to knock Meta Platforms off of the social media mountaintop anytime soon. Nevertheless, Meta Platforms’ shareholders should take all of the company’s potential threats and challenges into consideration.
By and large, Meta Platforms is a highly successful company and it’s fine to maintain a position in META stock. However, don’t feel the need to buy a boatload of Meta Platforms shares right now. Just be patient and see how the Meta-Musk battle plays out before making your next move in the markets.
On the date of publication, David Moadel 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.
