Facebook is a ubiquitous social media platform. Two billion people log into their Facebook accounts each day; almost 3 billion actively use the platform every month, making it the biggest social media site in the world.
A captive audience provides Facebook with a treasure trove of data that it can use to sell advertising. It generates billions of dollars in ad sales each year.
As a Facebook user, you might wonder how to invest in the company. Here’s a step-by-step guide on investing in Facebook stock and some factors to consider before investing in the technology stock.
Is Facebook publicly traded?
Facebook completed its initial public offering (IPO) in 2012. At the time, it traded on the NASDAQ Stock Exchange using the stock ticker FB.
However, the company has evolved over the past decade. In 2021, the company rebranded to showcase its move beyond social media. Among its biggest investments is in the metaverse, which led the company to change its name to Meta Platforms (META 1.97%) and its stock ticker to META.
In addition to its namesake social media platform and metaverse investments, Meta owns several other technology brands. The most notable ones are:
- The photo and video-sharing app Instagram.
- Mobile messenger service WhatsApp.
- Virtual reality technology company Oculus VR.
How to invest in Facebook
While you can’t invest specifically in Facebook’s social media platform, you can invest in its parent company Meta Platforms. You can buy shares of Meta in any brokerage account. If you still need to open one, these are some of the best-rated brokers and trading platforms. Here’s a step-by-step guide to buying Meta stock using the five-star-rated platform TD Ameritrade.
TD Ameritrade makes it easy to buy stocks. It offers a few options to place a trade. The first way is to click the “Trade” tab at the top of the page:
From there, click the link for “Stocks & ETFs.” That will take you to the following page:
On this page, fill out all the relevant information, including the quantity of shares you want to buy, the ticker symbol (META for Meta Platforms), and whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.
Once you finish filling out the order page, click the “Review Order” button at the bottom of the page. Review your trade, carefully ensuring you’ve selected the correct ticker symbol (META for Meta Platforms) and number of shares you want to purchase. Once you’re ready, click “Submit” and become a Meta Platforms shareholder.
Another way to place a trade on TD Ameritrade is through the “SnapTicket” box at the bottom of any screen. Clicking that will take you to the following box:
Fill out all the order information and click the “Review Order” button. Review your trade and submit.
Alternative ways to invest in Meta Platforms
Instead of buying Meta Platforms shares directly, you can passively invest in the technology company through a fund holding its shares.
Meta Platforms is among the world’s largest companies by market capitalization and is a widely held stock. Meta is in several stock market indexes, including the NASDAQ Composite and S&P 500 Index. As a result, index funds and exchange-traded funds (ETFs) that benchmark their returns against those indexes hold Meta stock.
According to ETF.com, 346 ETFs held 195.8 million shares of Meta as of early 2023. The Invesco QQQ Trust (NYSEMKT:QQQ) owned the most shares at 29.4 million. The ETF had a 3.54% portfolio weighting to Meta, making it the fund’s eighth-largest holding.
Other ETFs have more exposure to Meta stock. The Communications Services Select Sector SPDR (XLC 1.92%) has the largest allocation to Meta stock at 21.3%, making it a potentially attractive alternative to passively gain Meta stock exposure.
Should I invest in Meta Platforms?
Before investing in Facebook’s parent company stock, you need to determine whether Meta Platforms shares are a good investment. Here are some factors to consider before investing in Meta stock.
Is Meta Platforms profitable?
Meta Platforms is a profitable company. The social media giant reported $23.2 billion of net income in 2022. However, that was down 41% from the $39.4 billion of net income it posted in 2021. Higher costs were a big driver. Meta’s total costs and expenses rose 23% in 2022 to $87.7 billion. The surge in spending was partly due to a 20% increase in its headcount as the company ramped up hiring to expand its business.
The company behind Facebook is also free cash flow-positive. Meta generated $50.5 billion of cash provided by operating activities in 2022 and $18.4 billion in free cash flow after capital expenses. That enabled the technology giant to return cash to investors by repurchasing shares ($27.9 billion in 2022) while maintaining a cash-rich balance sheet ($40.7 billion in cash, equivalents, and marketable securities against $9.9 billion of debt).
Meta is taking steps to reverse its profit decline. The company unveiled a restructuring program in late 2022 to cut costs. It’s consolidating facilities, laying off employees, and canceling several data center projects.
Meta Platforms’ revenue
Meta Platforms generated $116.6 million of revenue in 2022, about 1% lower than its total in 2021.
The company has three revenue sources:
- Family of Apps Advertising: $113.6 billion or 97.5% of the total.
- Family of Apps Other: $809 million or 0.7% of the total.
- Reality Labs (VR and metaverse): $2.2 billion or 1.9% of the total.
Meta Platforms’ valuation
Here’s a snapshot of Meta Platform’s valuation:
As that chart shows, Meta traded at 20.9 times its forward price-to-earnings (PE) ratio and 28 times free cash flow as of early 2023. For comparison, the S&P 500 traded at a forward PE ratio of 17.3 times and about 20 times free cash flow. Meanwhile, the Nasdaq Composite traded at 23.5 times its forward PE and 25 times free cash flow. These valuation metrics suggest Meta Platforms stock trades at a slight premium to the broader market indexes.
Does Meta Platforms pay a dividend?
As of early 2023, Facebook’s parent Meta Platforms didn’t pay dividends. While the company is wildly profitable and generates significant free cash flow, it uses the money to invest in expanding its platforms and repurchasing shares.
The bottom line on investing in Meta Platforms stock
Facebook is the most popular social media platform on the planet. Facebook’s parent company Meta is cashing in on all those users by generating billions of dollars in advertising revenue each year, giving it money to invest in expanding into new areas, including the metaverse. While those investments have weighed on the company’s profits in the past year, they could re-accelerate its earnings growth rate in the future. Meta Platforms could be an exciting stock to own for the long term.
— to www.fool.com