Back in January, I sold all my shares of Facebook (META -2.70%). At the time, I was concerned about the future of its targeted advertising business, its slowing revenue growth per user, and the escalating regulatory threats. The Capitol riot on Jan. 6 also convinced me it was losing control of its own users.

However, Facebook's stock has risen 40% since I sold my stake. Calls to punish Facebook for its proliferation of fake news and hate speech gradually died down, and its revenue growth accelerated again as its core advertising business faced fewer pandemic-related headwinds.

Facebook CEO Mark Zuckerberg.

Image source: Facebook.

If you also sold Facebook earlier this year, you might be wondering if it's too late to buy the stock again. Let's take a fresh look at the company, its long-term growth potential, and its valuations to decide.

How fast is Facebook growing?

Facebook generated 98% of its revenue from ads last quarter. It displays those ads across its namesake platform, Messenger, Instagram, and WhatsApp, as well as third-party apps and websites through its Audience Network. The remaining sliver of its revenue mainly comes from its Oculus VR headsets and Portal smart screens.

Facebook's entire "family" of apps (Facebook, Messenger, Instagram, and WhatsApp) served 3.51 billion monthly active people (MAP) last quarter, who each generated $8.31 in average revenue per person (ARRP). Both of those key metrics have consistently risen over the past year.

Growth (YOY)

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

MAP

14%

14%

14%

15%

12%

Family ARRP

(2%)

7%

17%

29%

37%

Source: Facebook. YOY = Year over year.

Facebook's ability to maintain those growth rates is remarkable, considering that nearly half of the world's population already uses at least one of its apps. Its MAP growth is gradually decelerating, but its accelerating ARRP growth is offsetting that slowdown. As a result, Facebook's revenue and earnings growth accelerated significantly over the past two quarters.

Growth (YOY)

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Revenue

11%

22%

22%

48%

56%

EPS

98%

28%

57%

93%

101%

Source: Facebook. YOY = Year over year.

What challenges does Facebook face?

But during last quarter's conference call, Facebook CFO Dave Wehner warned that the company's year-over-year revenue growth rates in the third and fourth quarters would "decelerate significantly on a sequential basis as we lap periods of increasingly strong growth."

On a two-year basis, which excludes the impact of lapping the COVID-19 recovery, Wehner expects Facebook's total revenue growth to "decelerate modestly" from the second quarter into the second half of the year. Wehner also pointed out that Facebook would face "increasing ad targeting headwinds" from regulatory and platform changes, especially Apple's (AAPL 1.30%) privacy changes on iOS, in the third quarter.

As a result, analysts expect Facebook's year-over-year revenue growth to decelerate to 37% in the third quarter and 24% in the fourth quarter. For the full year, they expect its revenue and earnings to both rise about 39%.

Over the long term, Facebook expects to overcome its regulatory challenges -- which include antitrust probes in the U.S. and Europe -- and build a "metaverse" with VR and AR devices. During last quarter's conference call, Facebook CEO Mark Zuckerberg declared the metaverse represented the "next generation of the internet" as well as the "next chapter for us as a company." That evolution could gradually reduce Facebook's dependence on targeted ads and expand its ecosystem beyond PCs and mobile devices.

Is it too late to buy Facebook's stock?

Facebook's stock trades at 24 times forward earnings and nine times this year's sales. Those valuations indicate Facebook remains cheap relative to its growth potential -- and that its prior fake news, hate speech, and political controversies significantly depressed its valuations.

Facebook isn't out of the woods yet, but it's taken steps to reduce the flow of fake news, hate speech, and controversial political stories on its platform over the past year. It will still face lots of probes and lawsuits regarding its business practices and market dominance, but I doubt that any amount of regulation will actually derail Facebook's entire business.

Therefore, I don't think it's too late to buy Facebook's stock again. I clearly underestimated the tech giant's ability to weather its controversies and continue expanding, and I believe it will continue to dominate the global social networking market for the foreseeable future.