If you held Meta Platforms (NASDAQ:META) stock throughout 2023, it’s fine to declare, “Mission accomplished.” This doesn’t mean you have to exit your Meta Platforms share position completely. A prudent strategy is needed as Meta Platforms faces powerful regulators/legislators.
Don’t get the wrong idea. Meta Platforms is an unstoppable force among its competitors in the social media space. On the other hand, this doesn’t mean Meta Platforms stock will be unstoppable in 2024. Be aware of the company’s challenges and opportunities, and adjust your investment strategy accordingly.
Know Your Limitations With META Stock
It’s amazing to consider that META stock started 2023 at around $125. Lately, it’s been above $330. If you’re unsatisfied with those gains, then you need to consider the old saying: “There are bulls and there are bears, but pigs get slaughtered.”
In other words, don’t get greedy. Meta Platforms has a GAAP trailing 12-month price-to-earnings (P/E) ratio of nearly 30x. That’s not outrageously high, but it’s far above the sector median P/E ratio of 17.44x.
This doesn’t mean Meta Platforms won’t continue to rally. After all, Meta’s revenue jumped 23% year over year in 2023’s third quarter, driven to a large extent by impressive social media advertising revenue. Furthermore, Meta Platforms’ EPS soared 168% year over year in Q3 2023.
Therefore, it makes sense to hold on to some META stock shares. At the same time, it’s also reasonable to take profits on some Meta Platforms shares if you’re in a profitable position.
Meta Platforms Stock Could Buckle Due to Regulatory Pressures
It will be difficult for Meta Platforms stock to repeat 2023’s rally in 2024 if regulators/legislators continue to hound the company. For instance, according to The Wall Street Journal, regulators in Italy are accusing Meta of failing to “provide adequate information on how to mark branded content and monitor the use of the tool in relation to promotional content on Instagram.”
Along with that, Meta Platforms is under the microscope in the U.S. as regulators continually probe the company. On that topic, three news stories are particularly worrisome:
- Per CNBC, 42 U.S. state attorneys general are suing Meta Platforms, claiming that “features on Facebook and Instagram are addictive and are aimed at” children and teenagers.
- Per The Wall Street Journal, the attorneys general of 33 U.S. states lodged a legal complaint against Meta Platforms, alleging that the company collected the personal information of millions of underage users.
- Also per The Wall Street Journal, multiple U.S. state regulators claim that Meta Platforms “sought to design its social-media products in ways to take advantage of known weaknesses of young users’ brains.”
For investors, the best solution isn’t a knee-jerk, panic-selling response. So far, Meta Platforms has withstood the ire of regulators and continued to post excellent financial results. Nevertheless, it’s wise for stock traders to keep tabs on Meta Platforms’ obstacles in the legal sphere.
META Stock: How Much Will You Hold, and How Much Will You Sell?
Battling regulators in court isn’t a simple task. Meta Platforms will undoubtedly have to spend money to push back against multiple regulators/lawmakers in the U.S. and abroad. Hence, it’s fine to take partial profits with Meta Platforms stock.
It also makes sense to hold on to part of your META stock position, though. Meta Platforms has deep capital resources because the company is a revenue and profit generating machine. So, consider how many Meta shares you want to hold into 2024, and how many you’d like to cash out.
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.