Is Meta Platforms' Business in Trouble?
A recent report from "The Wall Street Journal" uncovered lax policies around Meta Platforms' ad business.
Meta's growth rate slowed down in recent quarters. A further decline could make the stock due for a sell-off.
The company is also in the midst of an antitrust case, which could see it losing Instagram and/or WhatsApp.
10 stocks we like better than Meta Platforms ›
Meta Platforms (NASDAQ: META), the social media giant that owns Facebook, Instagram, and WhatsApp, has been a growth beast in recent years. Its revenue is growing at a fast pace, and the stock is soaring. Since the start of 2023, the stock price is up 431%.
But past performance, as they say, is no guarantee of future performance. Could there be trouble ahead for the company? A recent report from The Wall Street Journal discussed some significant shortcomings in Meta's business, which it says could make Meta vulnerable to regulatory pressures in the future.
Here's what you need to know if you're thinking about buying Meta Platforms' stock today.
According to the Journal's May 15 report, documents revealed that Meta Platforms "accounted for nearly half of all reported scams on Zelle for JPMorgan Chase [account holders] between the summers of 2023 and 2024." And regulators in Britain and Australia were also seeing similar patterns.
However, those still weren't the most mind-boggling numbers from the reporting. Incredibly, an estimated 70% of new advertisers on the platform, the report said, were found to be promoting scams or selling illegal or low-quality products. And in some cases, it could take 32 strikes before an account might get banned from the platform.
Meta has developed a reputation for having problems related to misinformation circulating on its platforms for years, but these new reports arguably take things to a new level. My concern is that a lot of the company's revenue growth may be due to having lax policies, and that makes its platforms hubs for scammers.
According to The Wall Street Journal, a spokesperson from Meta said the company is working the fix the issues being raised and has issued warnings to users to be wary, but it has also argued in court cases about whether it should be held liable that it has no legal responsibility to make fixes. While the company talks about improving its practices, the report's findings don't suggest it's doing nearly enough.
In 2023, when shares of Meta were picking up steam, its growth rate was accelerating and was on a much more positive trajectory than in 2022, when companies were scaling back on ad spend. But if that strong growth was due to having loose rules around ads, that poses big question marks about what its growth rate might really be if it were to take a much tougher stance.
Meta's growth rate has already begun to slow down in recent quarters, and the risk is that more of a slowdown may be inevitable. Regardless of whether it tightens up its policies or not, adverse macroeconomic conditions could weigh on its operations. Chinese retailers are already looking to cut back on ad spending this year due to tariffs, and that could impact Meta's advertising business to the tune of $7 billion, according to an estimate from MoffettNathanson.
If the company does put tougher policies in place, or is forced to do so through greater government oversight, that could make a bad situation even worse for Meta.
Meta Platforms' stock looks relatively cheap based on current estimates, trading at 24 times its trailing earnings, but that multiple could look far different if the company has to take a tougher stance on policing its ads. It also faces the risk of a possible breakup due to antitrust issues, where it may need to sell off Instagram and/or WhatsApp, two of its more popular social media applications, especially when it comes to younger audiences.
Year to date, the stock is up around 9.3%, but it is down about 13% from its 52-week high. Between a slowing growth rate, a possible breakup of its business, and a questionable business model, there are a flurry of reasons to avoid the tech stock right now. While Meta has been doing well in recent years, this is a stock I'd stay away from as I have serious doubts about its long-term growth potential.
Before you buy stock in Meta Platforms, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Meta Platforms wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!*
Now, it's worth noting Stock Advisor's total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of May 19, 2025
JPMorgan Chase is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Meta Platforms. The Motley Fool has a disclosure policy.
Is Meta Platforms' Business in Trouble? was originally published by The Motley Fool
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
25 minutes ago
- Yahoo
Why CrowdStrike (CRWD) Stock Is Falling Today
Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) fell 5.5% in the afternoon session after the company reported mixed first quarter 2025 (Q1 FY-26) results: its revenue guidance for next quarter slightly missed and its full-year revenue guidance was just in line with Wall Street's estimates. On the other hand, CrowdStrike beat convincingly on operating profit. Looking ahead, guidance was solid. The company's EPS guidance for next quarter topped analysts' expectations, and its full-year EPS guidance slightly exceeded Wall Street's estimates as well. Overall, this was a mixed quarter and not enough for the high expectations around the stock (as evidenced by the 52-week high right before reporting and a 40+% stock price appreciation year-to-date before the print). The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy CrowdStrike? Access our full analysis report here, it's free. CrowdStrike's shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today's move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. The biggest move we wrote about over the last year was 11 months ago when the stock dropped 14.7% following a global technology outage. The outage was caused by a faulty update deployed by CrowdStrike to computers running the Microsoft Windows operating system. CrowdStrike clarified that the issue wasn't caused by "a security incident or cyberattack." CEO George Kurtz noted on the social media platform X (formerly called Twitter) that "the issue has been identified, isolated, and a fix has been deployed." However, the issue had far-reaching consequences, affecting systems in industries delivering critical services, including hospitals, banks, and airports. CRWD stock's decline suggested markets might be struggling to understand the long-term implications of the issue, especially as it relates to CrowdStrike maintaining its dominance in the highly competitive cybersecurity space, which often permits little to no room for mistakes. Wedbush analyst Dan Ives provided insights on how this might play out, adding, "It could create opportunity for some competitive displacements, but this will take time to determine the path of CIOs and companies looking ahead and related legal actions related to this outage." CrowdStrike is up 33% since the beginning of the year, and at $461.84 per share, it is trading close to its 52-week high of $488.76 from June 2025. Investors who bought $1,000 worth of CrowdStrike's shares 5 years ago would now be looking at an investment worth $4,812. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
Los Angeles Times
32 minutes ago
- Los Angeles Times
Meta sued by Eminem's publishing company over alleged copyright infringement
Eight Mile Style, a company that owns some of Eminem's most popular songs, is suing social media giant Meta over alleged copyright infringement. The lawsuit, filed in a federal court in Michigan, accuses the Menlo Park-based tech company of storing, reproducing and distributing Eminem's music without obtaining the license to do so. Eight Mile Style, which is based in Ferndale, Mich., is seeking at least $109 million from Meta and a court order to stop several alleged forms of copyright infringement. Music is a big part of social media. On Meta's platforms such as Facebook and Instagram, people add music in photos and videos they share publicly or with their friends and family. But the way social media has changed the way people listen to and discover new songs has also sparked concerns from artists about whether they're fairly compensated. 'Meta's years-long and ongoing infringement of the Eight Mile Compositions is another case of a trillion (with a 'T') dollar company exploiting the creative efforts of musical artists for the obscene monetary benefit of its executives and shareholders without a license and without regard to the rights of the owners of the intellectual property,' the lawsuit said. Meta said in a statement that it has licenses with thousands of partners globally and an 'extensive' global licensing programs for music on its platforms. 'Meta had been negotiating in good faith with Eight Mile Style, but rather than continue those discussions, Eight Mile Style chose to sue,' the company said in an email. Eight Mile Style owns and controls 243 compositions recorded by Eminem, a rapper and music producer that has created popular hits such as 'Lose Yourself.' Meta did remove some of these songs including 'Lose Yourself' from its music libraries, but other versions of the music including a piano instrumental cover and a karaoke version still remain on the platform, according to the lawsuit. Meta not only allowed users who upload these songs to infringe on copyright but knowingly stored and reproduced them in its music libraries so users can use the music in videos and photos, the lawsuit alleges. Users have added Eminem's music in millions of videos that have been viewed billions of times, according to the lawsuit. Meta also unsuccessfully tried to obtain a license for Eminem's songs as part of negotiations with the digital music royalty company Audiam even though the firm didn't have the authority to give them that license. 'Meta executives have actively encouraged such rampant infringement in order to attract as many users as possible to, among other things, make advertising on their services more profitable for themselves,' the lawsuit said. More than 3 billion people use one of Meta's apps daily, and the company makes billions of dollars every quarter from advertising. In the first three months of this year, Meta's revenue reached $42.31 billion, an increase of 16% year-over-year. The company's net income jumped by 35% to $16.6 billion in the first quarter. This isn't the first time Meta has faced legal issues over the use of Eminem's music. In 2013, Eight Mile Style sued Facebook, alleging the social network used the Eminem song 'Under the Influence' for an ad without their consent.
Yahoo
38 minutes ago
- Yahoo
Why CoreWeave Rocketed 170% in May
CoreWeave rallied in May off of the April "liberation day" bottom. The company held its first earnings release, beating expectations and raising guidance. Nvidia disclosed that it raised its investment in the company. 10 stocks we like better than CoreWeave › Shares of CoreWeave (NASDAQ: CRWV) rocketed 169.5% in May, according to data from S&P Global Market Intelligence. CoreWeave had a busy month, not only recovering from April's "Liberation Day" along with the rest of the sector, but also holding its first earnings report since its March 28 initial public offering (IPO). Additionally, key customer and supplier Nvidia (NASDAQ: NVDA) disclosed that it had increased its investment in the company. Virtually all technology stocks and artificial intelligence (AI) stocks recovered in a big way after May 12, when the U.S. and China ratcheted down their mutual tariffs for 90 days in order to let trade talks proceed. The sky-high China tariffs had been at the heart of the worries over President Trump's tariff war, which had especially weighed on the semiconductor and AI sectors. Shortly after the rollback of China tariffs, CoreWeave also held its first-ever earnings release. In that release, CoreWeave beat revenue expectations handily. And while earnings per share missed by a lot, that was caused by one-time stock compensation costs associated with the IPO. Moreover, CoreWeave raised its revenue guidance for the year well above analyst estimates, although it also increased its outlook for capital expenditures. While investors had something of a mixed reaction to earnings, most Wall Street analysts raised their price targets afterward. But just days later, CoreWeave saw a massive spike in its stock after it was revealed that AI chip darling Nvidia had increased its investment in the company. That was followed by even larger analyst price target increases the following week. Not only did CoreWeave have a monster month of May, but the stock has also surged to begin June, following news of a 15-year, $7 billion data center expansion agreement with data center operator Applied Digital (NASDAQ: APLD). Given the massive spike in the stock price, there's a degree of meme stock momentum right now in CoreWeave. So investors should be careful with the stock at this valuation, which currently sits at about 15 times this year's revenue outlook. That's a high price for a stock with high investment needs and some substantial risks. One concern is that CoreWeave has to invest substantial amounts in fixed assets ahead of receiving revenues from its contracts. However, it appears investors are encouraged by the more aggressive growth outlook and willing to look past upfront investment needs in fixed costs that will probably require CoreWeave to raise more capital. Another risk that concerns me is the company's circular relationship with Nvidia, which is both a customer and, obviously, a key supplier. While AI demand and demand for Nvidia chips appears quite strong for now, should either demand ever slow down, CoreWeave could run into problems. Before you buy stock in CoreWeave, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and CoreWeave wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $656,825!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $865,550!* Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy. Why CoreWeave Rocketed 170% in May was originally published by The Motley Fool
