Like MySpace, 'Meta Has No Terminal Value In Its Core Business:' Analyst Flags Concerns On Meta And Looming TikTok Threat - Meta Platforms (NASDAQ:META)

Needham analyst Laura Martin reiterates an Underperform rating on Meta Platforms Inc META.
The analyst believes "Content is King." However, Meta does not control its content, most user-generated content (UGC).
As its top influencers abandon it for TikTok, the average time spent on Meta's apps falls, which puts downward pressure on advertising revenues.
The analyst believes Meta must pay them more to win back its hit content creators, implying rising customer acquisition costs and falling margins.
Even if hit content creators return, Reels monetizes well below Meta's historical apps, representing a headwind to core Meta's revenue growth. In its core business, Meta stated that Reels cannibalizes engagement time from its higher-monetization surfaces.
Meta does not control its distribution, so policy changes in Apple Inc AAPL iOS and Android can materially and negatively impact META's revenues.
Like MySpace, the analyst worries that META has no terminal value in its core business because adverse network effects accelerate its decline.
If money follows time, and time follows content, then TikTok wins.
Metaverse costs will not drive revenue growth until 2030 but will drive lower margins in FY23, the analyst writes.
The worry is that Meta's enormous spending to create the Metaverse indicates that it fears existential risks to its core historical business models.
Price Action: META shares traded lower by 0.18% at $181.34 on the last check Friday.