Last week, I wrote about my years of guiding river rafting trips in the wilderness of the Pacific Northwest. Specifically, I wrote about one harrowing experience in particular that was pretty illustrative of how it can sometimes feel as an investor.

If you haven’t read that piece, that’s okay. I think the ending pretty much sums up the feeling I was trying to get across:

That one hectic evening on the river didn’t ruin the trip. We got through it. The same will happen with investing. Yes, it’s been tough. Some of your holdings may be down big. But if you own the kind of stocks we regularly talk about (dominant firms, generate high cash flow, reward investors with dividends/buybacks), it will all be okay.

I bring this up because I want to spend some time today talking about Meta Platforms (Nasdaq: META).

What In The World Is Going On With META?

I’ve written about this stock many times over the years. I first recommended this company in June 2016, when it was still called Facebook, and its ticker symbol was “FB.”

Prior to its latest crash, the stock had performed well. At its peak, in September 2021, we were up over 220%, beating the S&P 500 by 105 basis points. But in the last 15 months, the stock has tumbled over 63% — wiping away a staggering $773 billion in market capitalization.

Much like that evening on the river — and the current state of the investment world — Meta got dogpiled with a number of headwinds…

• Apple’s privacy measure crushed advertising revenue.
• The quick and massive rise of TikTok.
• The end of the pandemic — folks aren’t stuck at home perusing Facebook and Instagram.
• The strong dollar.
• Sinking billions into the Metaverse.

Now let’s talk about a few of these…

The first real body blow was Apple’s privacy change. I’ve talked extensively about this in previous articles, so I won’t get into the weeds. What you need to know is that Apple’s privacy changes shaved billions of revenues and profits from Meta’s bread-and-butter: advertising.

In response, Meta has sunk billions into artificial intelligence (“AI”) to combat not only Apple’s privacy changes but also the challenges from TikTok.

So, let’s talk about TikTok — the social media platform that has taken the internet by storm. If you’re not familiar, TikTok is a video-sharing social-media platform owned by Chinese company ByteDance. The Washington Post did an insightful, in-depth article on TikTok that I would recommend reading: How TikTok ate the Internet.

Here are some highlights from the article:

• TikTok is the fastest app to reach 1 billion active users. If it were a country, it’d be the third largest on the planet.
• Roughly one-third (100 million people) of the United States uses TikTok.
• The average American viewer watches TikTok for 80 minutes a day — more than the time spent on Facebook and Instagram combined.

Facebook and Instagram will always face competition, but TikTok is the first real competitor that is stealing users away. Losing market share isn’t something Zuckerberg and Co. are used to. The knee-jerk reaction has been to deploy its war chest of cash into AI, hoping to figure out a way to patch the bleeding from TikTok and Apple’s privacy change.

On top of the billions spent on AI, the company is spending grips of cash on the Metaverse. Investors don’t like seeing companies spend billions of dollars and little to show for it.

Right now, Meta has little to show from it.

The Metaverse spending will likely be a drag on the company moving forward. But the upside, if successful, could be worth trillions in valuation. Unfortunately, we won’t know if it will succeed until a few years later.

Finally, I want to quickly touch on the strong dollar headwind…

A strong dollar greatly impacted Meta’s revenue in the third quarter — to the tune of $1.79 billion. This is a challenge a lot of companies are facing right now, so it’s worth looking at things on a constant currency basis. On that note, Meta’s revenue, rather than declining 4%, would have risen 2%.

Action To Take

The bottom line is that I still believe Meta is a great buy at current prices and valuation. Many of these headwinds will subside, and the company will return to growing sales and profits.

Also, I wouldn’t be surprised if Meta doubled a year from now because its comparable earnings should also be much better.

Think like Wall Street for a second… they like to compare quarterly earnings year-over-year. Well, META has reported some pretty dismal earnings this year. Earnings that they should easily beat next year… and investors will eventually applaud them for doing so.

Of course, I could be wrong on all of this. But I have a hard time seeing someone not making money in Meta over the next 12 to 24 months.

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