After a disappointing 2022 that rattled markets, the Nasdaq Composite index roared back and now is in record territory. This bullishness lifted some stocks to new heights.

Just look at Meta Platforms (META -2.41%). Since the start of November 2022, shares skyrocketed more than 450%. A favorable market environment, coupled with strong fundamentals, are propelling this business.

Meta has been one of the best performers in recent times. But before you buy and hold this magnificent social media stock, you need to know these three risks.

Metaverse uncertainty

One area that presents a sizable risk is the company's Reality Labs division, which houses its metaverse products and services. This is viewed by critics as a pet project for founder and CEO Mark Zuckerberg. And its ultimate result is far from certain.

Meta's Reality Labs division reported a $16 billion operating loss in 2023, after losing $14 billion the year before. These massive losses should continue because Zuckerberg will keep investing aggressively in this segment. His goal is to introduce what he believes could be the next major computing platform after smartphones.

Investors should probably give Zuckerberg the benefit of the doubt here, as what he's done over the past couple of decades building one of the world's most valuable enterprises is truly remarkable. But it's best to watch developments with the metaverse closely in the years ahead.

Regulatory headaches

Like many of its big tech peers, Meta seems to always be battling with regulators, mainly in the U.S. and in the European Union. A business of this size that has demonstrated its power and influence and that collects mountains of data can undoubtedly draw the attention of lawmakers.

Meta paid sizable fines in the past. And it typically always relates to how the business handles and protects its users' data. Ongoing regulatory headaches could distract the management team and potentially alter Meta's operations. And they could limit the company's ability to acquire other businesses that might strengthen its competitive position.

There's a positive take on this, though. And that's the simple fact that if a business finds regulatory burdens to be one of its biggest risk factors, then it clearly shows how dominant it has become. This all just points to how successful Meta is.

I expect these issues to continue coming up. That's what happens when usage on the company's social media apps approaches 4 billion people on a monthly basis. Investors can't ignore this reality.

Luckily, Meta generates tens of billions of dollars of free cash flow every year. This gives it the necessary financial resources to deal with whatever regulators throw its way.

Growth prospects

Meta's market cap currently sits at a whopping $1.3 trillion. And it generated $135 billion of revenue in 2023. These figures demonstrate how massive this corporation has become. It's natural that a business of this scale simply doesn't have the huge growth opportunities that it did a decade ago. To be fair, the digital ad market is definitely going to get larger, but the rate of growth is likely to slow.

Investors looking for monster returns in the years ahead should temper their expectations. I think it's reasonable to assume that the gains going forward won't resemble the past.

This shouldn't discourage shareholders. According to Wall Street consensus analyst estimates, Meta's revenue is projected to increase at a compound annual rate of 14% over the next three years, with earnings per share rising at a 22% annualized clip.

Should the metaverse investments start to bear fruit, it could prove to be the company's next big thing. And that means that over the long term, double-digit growth could continue.

If you're a Meta investor, it's smart to always be paying attention to any key bear arguments. This helps you gain a thorough understanding of the businesses you own.