This company has one of the best balance sheet in the world. Had been trading at 13x free cash flow. The boomers at Blackrock or any of these big firms would get a hard on to own a business like Meta at 13x free cash flow even if revenue stayed flat. Most mature businesses trade at 10-15x cash flow. Sure they're pouring $10b into the MetaVerse, but even after that they managed a $35b+ free cash flow and a better operating margin than all big tech. They're pouring money into R&D to figure out a better way of monetizing after apple banned ad tracking and having the best talent in tech you'l know they're gonna figure it out and return to growth next year. Even without the ad tracking it remains the best place to advertise on. WhatsApp is a hidden gem that still hasn't been monetized properly and is still growing. They'll monetize after user growth stagnates (user growth first, monetization later has always been their goal). Even with uncertain macro conditions, TikTok, apple ad tracking headwind and tough comps with last year where they had a Covid tailwind, they managed to eek out 7% revenue growth. What happens when the conditions improve and they develop better algorithms to work around the apple ad tracking ban? This is easily going to return to double digit revenue growth from next year. Being bearish at $300 is one thing but being bearish at $175? Everyone on Blind saying the stock is going to go down at $175 and trade at what? A single digit forward PE? This business was simply too cheap even if the MetaVerse bet fails. How can you be so bad at valuation?
lolwut
FML I am joining in August and stocks pop now.
👏👏👏👏
Been saying this for a long time although I think the metaverse rebrand was dumb and hurt their perception a lot. I think they should have just rebranded oculus if they wanted.
Yeah, they could have just rebranded Oculus as Metaverse and created a platform for that “Metaverse” product. That would have been Facebook’s “game” wing of the company. In the end—this is what they’ll end up doing. 🤷♂️.
I snapped some up this morning, ez tendies. But to answer your question, most techies I've seen can pass a leetcode interview but also fail to comprehend basic financial concepts
Engineers think they’re naturally smart enough to understand other fields with no experience like market sentiment
Someone said it finally !!! 👏👏
Maybe and maybe not. There is a bear case here. DAU decreasing is a leading indicator of revenue decreasing. In addition , opex spending will reduce fcf and ebitda. I’m not really clear why operating margin went up but that could be a pure cost cutting thing. Decelerating top line, increased costs , increased competition , and no strong path for viable business model on Metaverse still makes the stock a long shot. 7% revenue increase is pretty bad and in line with inflation. To me, it seems like the stock popped because it was pricing in even worse outlook. But just because FB didn’t do as badly as expected does not mean it is doing well.
I don’t know man. Just WhatsApp by itself is so untapped potential. It is even gaining a lot in the US (it has always been a international thing). What the OP is saying that even with stagnant user base, FB has a lot of room to grow revenue wise. Pricing it at 150 (as such people were claiming it could go) just doesn’t make any financial sense.
In a business where money is made from bidding for ads, you'd expect the advertising spend to go down. So to manage a 7% growth in this environment shows how strong their advertising moat is. DAUs actually went up this quarter even with Russia impact. And at this point plus minus 5% in users is expected since they already have half the world's population using their products. It's all about growing ARPU going forward which they have a lot of room to grow considering more than half their revenue comes from outside US where growth is naturally higher.
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Good DD, OP. Completely agree 👍