Meta Platforms (Nasdaq: $META), formerly Facebook, recently declared its first dividend of 50 cents per share. Meta stock soared 20% on the news. The decision to offer a dividend is usually a sign that a company is maturing. But, it could also be an admission that the company has nowhere better to invest its cash. So, what exactly does this announcement mean for Meta investors? Should you resign Meta to your dividend stock list? Or, do Zuckerberg & Co. still have plenty of growth ahead of them?

In this Meta stock forecast, I’ll determine whether the social media conglomerate still has room for growth ahead. By the way, I’m short on Meta Platforms. But, check out my newsletter Long, Long, Short to learn what investments I’m long on for the next 1-3 months.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. 

Meta Stock Forecast

Before talking about Meta’s dividend, let’s take a quick look at the company’s performance recently. Here’s how Meta Platforms has performed over the past three quarters:

• September 2023

• • Revenue: $34.15 billion (+23% YoY)
  • Income: $11.58 (+163% YoY)

• June 2023

• • Revenue: $32 billion (+11% YoY)
  • Income: $7.8 billion (+16.46% YoY)

• March 2023

• • Revenue: $26.65 billion (+2.64% YoY)
  • Income: $5.71 billion (-23% YoY)

Meta’s revenues keep trending up and to the right – no mean feat for a trillion-dollar company. Over the past decade, Meta Platforms has been pretty unstoppable. The social media conglomerate seemed to just scoop up users and churn out billions of dollars. But, the past few years have been a bit more sketchy. To start, Meta lost users for the first quarter. Then, it made a questionable transition to a “metaverse” company…whatever that means. Now, it’s announcing a dividend.

Meta’s Dividend: Cause For Celebration? Or Alarm?

To be clear, Meta’s dividend was definitely viewed by the market as a positive thing for the company. We know this because the stock soared on the news. If you’re not familiar, a dividend is just a payment of earnings to investors. When a company makes money, there are two main things that it can do with it:

1. Invest the money back into the business
2. Buy back shares of stock (to boost the stock price)
3. Pay a dividend to shareholders

Most high-growth companies choose to invest the money back into their business. This allows the company to grow, increase revenues, and enjoy a soaring stock price. For years, this has been Meta’s strategy and it has had no shortage of places to invest money. Zuck’s former startup has scooped up companies like WhatsApp, Instagram, and Oculus VR. The fact that Zuck is announcing a dividend could mean that there’s no better place for Facebook to invest the money. One thing is for sure, investing money into “the metaverse” hasn’t been working. 

Meta Platforms has been burning through billions of dollars each quarter to create the metaverse. But, Circana estimates that sales of VR headsets plummeted 40% in 2023. Now, Meta Platforms is facing even more competition in the VR space. I can’t write a Meta stock forecast without talking about Apple’s Vision Pro VR headset.

Apple Vision Pro: Meta’s Kryptonite?

About a year or two ago, Mark Zuckerberg dramatically shifted Facebook to focus on “the metaverse.” This included rebranding the company to Meta Platforms and investing billions into building a digital world. But, so far, this has been more or less a complete flop. Meta has had a tough time selling VR headsets (via its subsidiary, Oculus) and few people have wanted to participate. It seems like the perfect case of “building a product that no one asked for.” Now, to make matters worse, Apple just announced a major competitor to Meta’s Quest VR headset.

The early reviews for Apple’s Vision Pro blow the Quest out of the water. In fact, CEO Mark Zuckerberg went so far as to publish his own critique of the Vision Pro, urging people that the Quest is better. This is usually a red flag as it’s a sign of insecurity. Zuck’s video drew comparisons to Steve Ballmer laughing off the original iPhone. We all know how that turned out. But, there have also been reports of people returning their Vision Pro, saying it wasn’t worth the price tag.

All I’m saying is that Meta Platforms has hooked its entire future on the metaverse (and VR). But, it has no history of successfully producing hardware. All of its big wins (Facebook, Instagram, WhatsApp) have been software applications. In fact, I’d argue that Facebook hasn’t really built anything since the original Facebook. They’ve just acquired other companies to spurn their growth. Apple, on the other hand, has an extensive history of building successful hardware products (phones, TVs, computers, tablets, watches). If I’m picking one of these companies to win “the metaverse” I’m going with Apple.

Meta Stock Forecast: Final Thoughts

With all that said, I want to end my Meta stock forecast with this: I wouldn’t go so far as to short Meta. You know why? Because it has addictive products that have billions of users and generate billions of dollars. I’m talking about Facebook, Instagram, WhatsApp, and *maybe* Threads. 

Yes, there’s a chance that people might stop using Facebook and Instagram one day. But, that’s a big “might.” There’s also a chance that these two apps might give way to TikTok or another social media company. This is actually much more likely than thinking that people will just stop using Facebook. But, for all its popularity, TikTok is riddled with problems too. Mainly, the fact that the company is owned by the Chinese government and could get banned at any minute. TikTok has already almost been banned on a national level at least once. If TikTok gets banned then guess where all the users are running to? You guessed it. Back to Instagram, Facebook, Threads, and whatever platform Meta buys next.

But, at the same time, the future for Meta isn’t overly rosy. The company is constantly receiving negative press and has had its own share of legal issues. Zuck has redirected the entire company to focus on “the metaverse.” But, he’s churning through billions and has made little headway on this front. Now, Meta Platforms is facing steep competition from the world’s most valuable and innovative company: Apple. 

Finally, ask yourself this: if Zuck really believed in the future of the metaverse then wouldn’t he be investing even more cash into building it, instead of paying a dividend?

I hope that you’ve found this Meta stock forecast valuable in learning what to make of Meta Platform’s decision to launch a dividend. If you’re interested in reading similar articles, be sure to subscribe below to get alerted of new articles from InvestmentU.