If I’d invested $1,000 in Meta stock 5 years ago, here’s how much I’d have now!

Rebranding Facebook to Meta platform (NASDAQ:META) in October 2021 coincided with the early stages of a significant downtrend in the company’s stock price. Last year, Meta shares fell 65%, trailing the stock’s performance Nasdaq Composite An index with a significant margin.

However, the stock has since rallied 126% from its November 2022 low to above $205 today. This means that the five-year return is in positive territory. But what is the company’s reputation as a market-beating growth stock?

Let’s explore how the social media giant has performed over the past half-decade and where it’s headed next.

Five years back

If I had $1,000 to invest five years ago, I could have bought six Meta shares at $157.81 each, leaving me with more than $53 in spare change.

Today, my shareholding has increased to $1,232.10. On the face of it, that looks like a respectable 30% return.

However, over the same timeframe S&P 500 gained 55% and the Nasdaq advanced 72%. The Meta’s underperformance relative to the main index coupled with the company’s lack of dividend payouts means total returns are somewhat disappointing.

So why has Meta stock been struggling?

I think it’s mostly because the company is misplaced in the metaverse. These include radical name changes, the belief that a hypothesized digital universe will be the company’s future, and expensive investments in virtual reality and augmented reality technology.

While the metaverse concept may have merit, I struggle to see the business case behind it. Indeed, Meta’s financial results show that its value is enormous. The company’s Reality Labs unit, which houses metaverse technology, posted an operating loss of $4.28bn in the fourth quarter. This means a cumulative loss of $13.72bn for 2022.

Perhaps the most obvious sign of a metaverse flop is the story Horizon Worlds – Meta’s flagship virtual playground. More like a digital ghost town. The company has failed to attract anything close to its target of 500,000 monthly active users and is struggling to retain the users it has managed to secure so far.

That said, Meta shows its strength in the traditional social media arena. Advertising revenue from the company’s family of apps, including Facebook, Instagram, and Whatsapp, make up the majority of the company’s revenue.

Some of the new features, such as Reels and Candid Stories, are welcome innovations. The company also stands to benefit from the ban on TikTok in the US if that happens. Chinese social media platforms have become a growing source of competition.

Should I buy this stock?

I’m not happy with Meta’s change of direction in recent years. Maybe I’m missing the bigger picture, but to me it looks like a costly mistake for the company.

Although it still dominates the social media landscape and should continue to generate good revenue from its core offering, I think there are better stocks for me to invest in right now.

So, I’m going to write off the Meta stock now. However, I will keep a close eye on the company’s progress for evidence of concrete revenue generation that can ignite my interest.