Meta earnings - Why are folks on blind who make so much in RSUs so bad at valuation of stocks?
This company has one of the best balance sheet in the world. Had been trading at 15x 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 15x 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 $30b+ free cash flow and a better operating margin than all tech companies. 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've to be sure 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?
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DAU decreasing is a leading indicator of revenue decreasing. In addition , opex spending will reduce fcf and ebitda. Iβm 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 didnβt do as badly as expected does not mean it is doing well.