If You Invested $1,000 in Meta Platforms in 2022, This Is How Much You Would Have Today

Meta Platforms (META), the tech giant formerly known as Facebook, saw its shares surge to an all-time high of $382.18 during the buying frenzy in growth stocks on Sept. 7, 2021. That marked a ten-bagger gain from its IPO price of $38 in 2012. But by Nov. 4, 2022, Meta's stock had sunk to a seven-year low of $88.09.

Therefore, a $1,000 investment in its IPO would have briefly blossomed to over $10,000 before withering back to about $2,300. The bulls gave up on Meta as Apple's (AAPL) privacy-oriented iOS update, fierce competition from ByteDance's TikTok, and the macroeconomic headwinds all curbed the growth of its core advertising business.

Image source: Meta Platforms.

Even as Meta's growth cooled off, it continued to burn billions of dollars on its unprofitable Reality Labs (virtual and augmented reality) business. It also ramped up its investments in its short video platform Reels, which it admitted was tougher to monetize than its News Feed ads. That combination of slowing growth and rising expenses made Meta an easy target for the bears as rising interest rates rattled the tech sector.

However, Meta's stock subsequently bounced back to nearly $300 again. So you had invested $1,000 into Meta when most the bulls were retreating, your investment would have more than tripled to about $3,400 in just eight months. Let's see why Meta recovered so quickly -- and if it can generate even bigger gains.

Why did the bulls rush back to Meta again?

The bears believed Meta's advertising business, which accounted for 97% of its revenues in 2022, would face existential challenges as Apple's iOS changes disrupted its ability to craft targeted ads from third-party data. They also expected TikTok to continue pulling younger users and advertisers away from Facebook and Instagram.

That's why Meta's advertising revenues declined year over year for three consecutive quarters through the end of 2022. But in the first quarter of 2023, that losing streak finally ended when its advertising revenues rose 4% year over year.

Data source: Meta Platforms. YOY = Year-over-year.

That recovery was driven by Chinese cross-border e-commerce platforms like Pinduoduo's Temu, Alibaba's AliExpress, and Shein -- which all ramped up their ad spending to reach more overseas buyers. That expansion largely offset the macro-induced weakness of its financial and tech verticals. A higher number of total ad impressions also offset its declining ad prices.

As Meta's near-term ad sales stabilize, it's addressing Apple's iOS changes by gathering more first-party data for its targeted ads. It's also countering TikTok with Reels -- which it claims are already being reshared more than two billion times every day -- and it recently challenged Twitter with Threads, which surpassed 100 million sign-ups within its first week.

Meta is also still adding more new users to its core ecosystem. In the first quarter, the total number of monthly active people across its Family of Apps (Facebook, Instagram, Messenger, and WhatsApp) rose 5% year over year to 3.81 billion. That's already nearly half of the world's population, so Meta should remain a top advertising platform alongside Alphabet's (GOOG) (GOOGL) Google -- even if its near-term outlook has been clouded by platform, macro, and competitive challenges. That's why analysts still expect Meta's revenue to rise 9% in 2023 and 11% in 2024.

But what about Meta's profitability and valuations?

Meta has been aggressively cutting costs with three rounds of layoffs over the past year. But it doesn't plan to abandon the costly expansion of its Reality Labs segment, since it remains bullish on the future of VR and AR markets. It also recently launched its latest Quest 3 headset to keep pace with Apple's recent introduction of its Vision Pro headset.

However, the bulls will point out that Meta still generated roughly the same operating margin (25%) as Alphabet in the first quarter of 2023. That's because Alphabet also subsidizes the growth of many of its lower-margin businesses (such as Google Cloud) with its higher-margin advertising revenues. Furthermore, Meta is firmly profitable and it was still sitting on $11.6 billion in cash and equivalents -- as well as $25.9 billion marketable securities -- at the end of its first quarter. That healthy balance sheet should make Meta more appealing than many other tech stocks if interest rates stay elevated.

Analysts expect Meta's earnings to grow 36% in 2023 and 25% in 2024 -- as the recovery of its profitable ad business offsets the expansion of its unprofitable Reality Labs segment -- and its stock still looks reasonably valued at 25 times forward earnings. Alphabet, which is expected to grow at a slower rate than Meta, trades at 22 times forward earnings.

Meta has had a great run so far, but it could soar even higher if the macro environment improves. Investors might be kicking themselves for missing out on Meta's gains over the past eight months, but it's not too late to buy this blue-chip tech stock.