FB - Meta

Meta is down big today (-20%). This is a good opportunity to accumulate for long term investors.

PE of 15, GrossMargins of 80%, Growth of 20%, big investments in the evolving future

The big reason stock is down is rising expenses due to its bet on “metaverse” and declining growth - weak guidance (11% - 13% growth in revenue).
Investors are not convinced in the AR/VR vision.

  • KO has a PE of 30 and Gross margins of 60%. FB is a much better business. BRK would kill for 11%-13% growth.
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Just bought a 10% holding. Too good to miss! I only had a toe in the water before.

Tim Cook kicked them in the balls with privacy

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I’m seeing a trailing PE of 17.8 after this quarter’s results (using diluted numbers) and the current price are reflected, not 15. Still looks attractive.

Also, they expect growth of 3-11% for the next quarter, not 11-13%.

It’s certainly a wonderful business, and the value looks great if you trust Zuckerberg to lead them to robust future growth after a period of heavy investment and low growth in the coming year or two.

I do have some qualms investing in it, which I would put aside without much worry except my wife feels a lot stronger, so I risk her wrath/disappointment if I go ahead and put money in, lol. I guess it’s not worth it to me?

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I’ve learnt to never tell family what I’m investing in. Everytime I see them it’s did you read about this or that, always negative no matter how tiny a snippet and if a holding does well they’re either critical about what it is or think you’re bonkers for holding a concentrated portfolio. That includes my wife!

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Wondering if Warren is buying today?

Wondering if Warren is buying today?

Given Buffett’s circle of competence and desire for predictability, I would say no. But I wouldn’t be shocked if Ted or Todd bought at this level.

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I need to fully understand the Apple impact. I think it is far bigger than I anticipated.

I think there are some similarities between FB (Meta) and Microsoft (from say 2003-2005 era). In hindsight it is easy to say MSFT was a no brainer, but there was about a 10 year period where it was dead money as growth had slowed and they looked for the next big thing (with some mistakes (mobile) and one huge success (cloud)).

I wouldn’t be surprised to see FB trade at a 15-20 multiple with 10% growth in earnings for the next few years until things become more clear on their “metaverse” investments (which are enormous - $10B last year). A 10% return is nothing to complain about; but there are likely to also be other headwinds that could turn a decent year into a zero if for example there are scandals, or government intervention, etc…

So I am passing on FB - and I don’t think it fits the style of BRK either.

tecmo

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PS: Their moat is not as big as you might think - TikToc has shown that new platforms can come in and grow quickly.

tecmo

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<<PS: Their moat is not as big as you might think - TikToc has shown that new platforms can come in and grow quickly.>>

That’s the most important question. I have never used Facebook and don’t feel the need to. Nevertheless, I placed a limit order of $237 to buy a small amount, assuming it’s so popular for a good reason.

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But I wouldn’t be shocked if Ted or Todd bought at this level.

If we’re speaking about BRK, I don’t believe Ted and Todd are permitted to buy it.

If we’re speaking about BRK, I don’t believe Ted and Todd are permitted to buy it.

My bad. I didn’t pay attention to the subject line.

Here are some numbers from VL to consider before investing in FB:

Operating Margins 2017 = 57.1%
Operating Margins 2022 = 45.0%

Net Margins 2017 = 44.7%
Net Margins 2022 = 32.6% (after miss)

Will margins shrink even more as FB throws capital at META, and as Apple strangles the advertising baby?

Despite these dark clouds, FB is still growing and will likely continue to grow over the next 5-10 years. In order for an investment in FB to not make sense right now you have to believe that net margins will continue to decline by 1-2 basis points per year and revenue growth will come in at well under 10% per year over the next half decade. Is Facebook a dying company? If not, a investment right now should prove reasonably profitable (8-10% per year).

PP

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Is Facebook a dying company? If not, a investment right now should prove reasonably profitable (8-10% per year).

What should be the attractiveness of less safe 8-10%/year than the same from BRK?

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What should be the attractiveness of less safe 8-10%/year than the same from BRK?

Two things: (1) already way overweight in Berkshire, and (2) their is a lottery ticket on FB if its ad revenues recover and/or the metaverse is real.

The 8-10% expected return is based on pretty bleak assessments of the future for FB.

PP

What should be the attractiveness of less safe 8-10%/year than the same from BRK?

A bull for FB might suggest that it’s a comparison of a fairly pessimistic outcome for FB versus a normal outcome for BRK.
In other words, even though the two figures might be similar, FB might offer quite a bit more upside if their growth does NOT slump that much.
They are presumably generating absolute oceans of cash and are likely to continue doing so.
The majority of that cash is likely to benefit shareholders one way or another.
A low stock price for a few years might fit very well with an Apple-scale buyback programme.

Though it seems to be a different game from Berkshire, there are some similarities.
Huge, profitable, obvious, growing but not like the early days, moaty, bullet proof balance sheet, and management decisions in the hands of basically one guy.

Jim
(no position, but not for financial reasons–probably not a bad bet at these levels.
I’d be all over it like white on rice if I could stomach the management)

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I’d be all over it like white on rice if I could stomach the management)

That’s it!
Now is the time to, as another Jim says, “BUY BUY BUY”. (Cramer)

Maybe it’ll be another Dollar Tree.

I’ve never used facebook, but my wife does. She got hacked once and I told her to cancel her account, which she did.
A few days later, after my son tried to post her a photo of the grandkids, he called me up and said, “Dad, let Mom reactivate her facebook account.”

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I’d be all over it like white on rice if I could stomach the management

I think Mungo nailed the biggest risk. Management is icky and I’m afraid they might just burn up all that cash in a pointless quest for the holy grail of the metaverse. I don’t think that even Zuck can sink this ship in a half decade though.

PP

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I never used Facebook but I do use Whatsapp and so do all my friends and family, I would pay to use it. There is huge untapped monetization potential for Whatsapp.

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