META Platforms, Inc. (formerly Facebook) is one of the world’s largest technology and social media companies. As a leading company in the social media industry, META’s performance and future prospects are of great interest to analysts and investors. With the company undergoing a major rebranding and strategic shift towards building the metaverse, there is uncertainty regarding META’s future growth and profitability. In this article, we will explore what analysts are forecasting for META in terms of revenue, user growth, stock performance, metaverse investments, and other key metrics.
Revenue Forecasts
META has delivered strong revenue growth historically, driven by its digital advertising business and its dominance in social media with platforms like Facebook, Instagram and WhatsApp. However, revenue growth slowed in 2021 due to factors like Apple’s iOS privacy changes and increased competition from TikTok.
According to META’s Q4 2021 earnings report, the company expects revenue growth to slow to just 3-11% in Q1 2022. For full year 2022, analyst consensus revenue forecast is around $117 billion, which would represent growth of just around 7% year-over-year. This is a significant slowdown compared to 37% revenue growth in 2021.
The decelerating growth is attributed to headwinds like Apple’s ATT changes which have made META’s advertising targeting and measurement less effective. Increased competition from rivals like TikTok is also impacting META’s growth. Some analysts believe META will have to become less reliant on advertising revenue in the long run.
User Growth Projections
In terms of user growth, META reported 1.96 billion daily active users across its family of apps at end of 2021. For Q1 2022, it guided for daily active users between 1.94-1.96 billion, suggesting minimal growth.
Analysts believe META’s user growth is plateauing, especially in mature markets like North America and Europe. Growth is expected to come mainly from developing markets in Asia and the rest of the world.
META also expects its Reality Labs segment focused on metaverse and virtual reality to impact user growth modestly negatively in the near term. Over the long run, if META’s metaverse efforts gain traction, it could open up new avenues for user growth. But in the next 12-18 months, minimal user growth is expected.
Stock Price Targets
META’s stock declined over 40% from its September 2021 peak to January 2022. Some analysts attribute this to the slowing revenue and user growth outlook discussed above. Other factors impacting the stock price include:
– Privacy changes by Apple and other platforms reducing META’s advertising capabilities
– Emerging competition from TikTok and other apps
– Concerns about META’s metaverse spending and bets
According to MarketBeat, the average 12-month price target for META stock from over 55 analysts is $328. This implies upside of 29% from current levels around $255. However, analyst price targets range from a high of $405 to a low of just $220.
Some analysts are very bullish about META’s stock prospects if it can successfully transition to being a metaverse company and find new revenue streams beyond just advertising. Others are more skeptical of META’s metaverse ambitions and believe increased competition will weigh on the stock.
Metaverse Investment Projections
META is making a big bet on the metaverse being the next major computing platform after mobile phones. It has invested over $10 billion since 2021 into its Reality Labs segment focused on AR/VR and metaverse development.
For 2022, META has guided for total expenses for Reality Labs to be around $19-21 billion. This indicates its metaverse investments will ramp up rapidly this year. Analysts expect META’s spending on metaverse, including R&D and capital expenditures, to exceed $50 billion over the next 5 years.
These massive investments into unproven consumer metaverse experiences are seen as risky by some analysts. But if META can get key metaverse use cases like social interaction, gaming, work collaboration etc. to gain mainstream adoption over the next 5-10 years, it could provide a major long-term payoff.
Other analysts are worried these expenditures will hurt META’s profitability in the near term. META’s operating margins could trend down from 2021 levels of over 40% to the mid-30s range if metaverse investment costs continue rising.
Regulatory Risks
META faces substantial regulatory risks, especially relating to its dominance in social media and online advertising. Regulators in the U.S., EU and other jurisdictions are either implementing or considering new laws and restrictions around issues like data privacy, content moderation, limiting acquisitions and forcing divestitures.
For example, the proposed American Innovation and Choice Online Act could bar META from giving its social media apps preferential treatment compared to competitors. Analysts estimate this could shave off 3-4% from META’s annual revenue if passed into law.
New digital advertising transparency requirements like Apple’s ATT are also expected to impact META’s ad targeting and measurement capabilities going forward. Tighter regulation remains an ongoing risk for META, both in terms of limiting revenue growth and increasing compliance costs.
Adapting to the TikTok Threat
TikTok has emerged as a top rival for META’s apps in terms of consuming user time and attention, especially among Gen Z users. To adapt to TikTok’s competitive threat, META is incorporating more algorithmically recommended short-form video content into apps like Facebook and Instagram.
META has also launched its own TikTok-like offering called Reels. Analysts see Reels as unlikely to fully offset engagement declines on META’s other services. But it represents META’s strategy of mimicking competitors’ successful features and formats.
Longer term, if META can innovate its social media offerings to be more immersive via AR/VR technology, it may be able to differentiate itself again versus TikTok. But in the near term, adjusting to a world where TikTok dominates short-form video is a key priority.
Privacy and Advertising Headwinds
Beyond TikTok, META faces challenges to its advertising business from privacy changes implemented by Apple, Google and other platforms. These changes limit META’s ability to track users for targeted advertising.
Apple’s App Tracking Transparency (ATT) feature has had the biggest impact so far. Analysts estimate it reduced META’s 2021 revenue by around $10 billion. With limited user data, META has struggled to prove the value of its ads to advertisers.
Google’s plan to phase out third-party cookies from Chrome by 2024 will be another major hurdle. This will prevent tracking users across websites and apps. Overall, analysts expect META’s advertising revenue growth to slow by 3-4 percentage points per year through 2024 due to these privacy headwinds.
To adapt, META is developing on-device personalization techniques to serve relevant ads without accessing user data. But pivoting its massive ad business to a more privacy-centric model will take time. Tighter privacy controls look set to impact META’s business for years to come.
Potential Growth Areas
While META faces an array of challenges to its advertising business, analysts also see opportunities for growth into new areas. Two of the most promising are:
E-commerce – META is building out shops, payments and live shopping capabilities across its family of apps. The global social commerce market is forecast to grow rapidly in the coming years. META’s apps reach billions of users who could become buyers and sellers.
META Workplace – This business communication and collaboration tool is gaining traction with enterprise customers. Analysts see Workplace as a long-term growth driver as hybrid work expands. Revenue from Workplace and other non-ad areas remains small for now but is ramping up.
If META can diversify its revenue streams beyond just selling digital ads, it may be able to return to stronger growth rates. But monetizing areas like commerce and enterprise software is not META’s core expertise historically, so scaling these new initiatives will take time and investment.
Potential for Cost Cuts
With its growth slowing, some analysts believe META may need to implement cost cutting measures to protect profitability. Areas where spending could potentially be reduced include:
– Slowing the pace of metaverse/Reality Labs investment
– Tightening budgets for headcount growth and internal projects
– Renegotiating supplier and vendor contracts
– Eliminating marginal and non-core product offerings
META’s operating expenses rose 34% year-over-year in 2021, far outpacing revenue growth. Trimming expenses to be more in line with slowing top line growth may help shore up profitability.
However, too much cost cutting also runs the risk of hampering META’s innovation efforts. Balancing cost discipline with continuing to invest in future opportunities will be key. But if growth keeps decelerating, analysts expect META’s margins to decline over the next 2-3 years.
Acquisition Opportunities
META has historically expanded and entered new areas through major acquisitions like WhatsApp and Oculus. But its ability to continue making big tech acquisitions is now limited due to shifting antitrust sentiment.
META has made several acquisitions in the past year focused on areas like customer service, e-commerce and VR gaming. But regulators are unlikely to allow transformative deals of $1 billion or more for the foreseeable future.
Analysts don’t expect META to be able to make many big, bold bets through M&A as part of its metaverse strategy. Smaller, strategic acquisitions will continue, but the era of META acquiring its next major growth engine via a mega-deal seems over.
This will put more pressure on META to build new tech and products in-house to fuel long-term growth. Lack of big acquisition opportunities increases execution risk as META tries to reinvent itself and catch the next major computing wave.
Conclusion
META is still a highly profitable business with billions of users and a dominant position in digital ads alongside Google. But analysts have growing concerns about its decelerating growth, intense competition from TikTok, mounting regulatory threats and massive metaverse investment costs.
META is attempting to reinvent itself and stay culturally relevant, especially for younger audiences. But metaverse success is far from guaranteed. And META’s legacy advertising business faces continuous disruption from platforms like Apple and new laws aimed at limiting data tracking.
While some analysts see upside if META can execute well and become a leader in the next computing era, others believe the company’s best growth days are likely behind it. Navigating the next 5 years as user growth stalls, revenue growth normalizes and big acquisitions become harder to complete will be enormously challenging.
The wide range in analyst price targets reflects a high degree of uncertainty regarding META’s future prospects. But the overall analyst consensus is that META is entering a prolonged period of slower growth and lower profitability amid a tech landscape growing more hostile to its advertising dominance. Transforming META into a metaverse leader able to drive top line growth above 5-10% annually looks to be an uphill climb.