Why Meta Platforms Stock Isn't as Safe or as Cheap as It May Look

One big tech stock that analysts routinely talk about how cheap it looks is Meta Platforms (NASDAQ: META). But I think they could be completely wrong about that.

While there's no doubt Meta's business is massive, profitable, and growing, there are considerable headwinds that investors shouldn't overlook. And although things look rosy right now, I think there may be trouble ahead for Meta, which could call into question just how safe and cheap the stock really appears to be.

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Here's why you may want to think twice about owning the social media stock.

Image source: Getty Images.

Meta's growth rate could continue to slow

Meta Platforms has been generating some solid growth over the past couple of years as its ad business has been flourishing. With its social media applications reaching billions of users every month, it provides advertisers with convenient ways to reach their target markets. The trend recently, however, has been a downward one.

META Operating Revenue (Quarterly YoY Growth) data by YCharts

There are also potential headwinds for investors to consider; the first is the ongoing trade uncertainty involving the U.S. and China. While both countries have paused most of their tariffs for 90 days as of Monday, the situation is evolving, and it's difficult to predict how it will play out. But Meta is already noticing a slowdown in ad spend from Chinese online retailers as a result of the U.S.' tough trade policy. And if that trend continues, the company's growth rate may decline even further this year.

Another problem is that the U.S. economy may face challenges of its own. In the first quarter of 2025, the U.S. experienced its first period of contraction since 2022. While the decline was modest (negative 0.3%), it could spark fears that a recession may be on the horizon, especially if tariffs weigh down consumer spending this quarter. If companies are worried about a downturn, one of the first places they could look to trim budgets is in advertising and marketing, which would also hurt Meta's double-digit growth rate.

Yet another risk is the antitrust trial Meta faces this year, which may result in it having to sell Instagram and/or WhatsApp, two incredibly popular apps with younger audiences. If it loses those assets, that could further diminish how much money Meta generates from ads.

A slowing growth rate could shine a spotlight on the rest of its business

Meta's stock has risen by more than 230% over the past three years, as growth investors have been encouraged by its solid earnings numbers. But its performance hasn't been all good. Investors have for the most part been able to gloss over the multibillion-dollar losses in Meta's Reality Labs division, which is its metaverse business, simply because the company's core operations have been doing so well. But that could change.

If Meta's growth rate continues to slow, its metaverse business may get more attention. As investors saw in 2022 amid a surge in layoffs, when growth rates start to buckle, companies zero in on controlling costs and trimming unnecessary expenses.

And under less favorable market conditions, Reality Labs, which incurred a whopping $4.2 billion loss in just the first three months of 2025, may stand out a bit more to investors. The rest of Meta's business has been performing well, allowing the company to turn an operating profit of $17.6 billion this past quarter, despite the poorly performing segment.

The danger is that if its core business (Family of Apps), which relies heavily on ad spend, slows but Reality Labs continues to incur significant losses, that could make Meta's price-to-earnings multiple start to swell. Currently, the social media stock trades at 23 times its trailing earnings and may look cheap, as that is in line with the S&P 500 index average. But if that changes and Meta's growth stumbles, the stock could quickly become unattractive to growth investors, as it was in 2022 when it fell by more than 60%.

Meta Platforms stock could be due for a big decline

In the past three months, Meta's stock has fallen by 12% after reaching highs of more than $700. But I still see a lot more risk for it to fall even lower in the months ahead. The stock is dependent on the strength of the ad market, and while it has benefited from a strong economy and advertisers flocking to its platform, the tide could turn, especially if an antitrust trial involving the company leads to it having to sell WhatsApp and Instagram.

While Meta's stock has been riding high in recent years, at this stage, there are far better growth stocks out there to consider.

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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 Meta Platforms. The Motley Fool has a disclosure policy.