Seems like enough headwinds to wonder about where earnings will be 10, 20 years from now, despite the ‘current’ cash flow yield and margins.
. Awful core product for society
. Lawmakers hate it. Lawmakers are powerful
. Core FB is declining. Every year another swath of users get older and don’t get replaced
. Instagram and whatever fresh eyeball catchers are great and importantly Meta is clearly good at building, buying and promoting them, but I could see other firms coming up with the next hot thing. Seems like products with life cycles much shorter than a Coke, Apple, Google, Amazon, BNSF, See’s, Berkshire Energy, Costco.
. The meta verse pivot or reinvention may well be wonderful but it doesn’t meet the “almost certain” test.
“Your goal as an investor should simply be to purchase, at a rational price (Yes), a part interest in an easily understandable business (yes) whose earnings are virtually certain (maybe?) to be materially higher five, 10, and 20 years from now.”
Above is probably a little simplistic which reflects my analysis of the company.
On a separate note, Grantham’s comments about the confidence termites spreading to the quality names, gains momentum with Meta joining Netflix…who is next Tesla or Amazon?
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)
I think this is a good opportunity to buy a great company at a good price. I just wish Google would give us a similar opportunity, not that I have any excuse, really, after wanting to buy it for years and not doing anything when it spent most of 2020 at half of today’s price. I don’t have any problem with management OR with the product, so rice it is.
The other big opportunity, that I was going to post about, but which lost a bit of its relevance while I was typing, is Shopify. It is the anti-Amazon, offering small sellers the opportunity to do web-commerce without accepting the smothering embrace of Amazon. It traded down from about $900 to almost $800 today, for a market cap of about $100B, after peaking at more than twice that in November. Hard to say exactly how much it’s worth, but it has been increasing revenues at 60-100% last year, and is trading at ‘only’ about 30 times net income from the last 12 months. So if growth plummets to 40% for the next 2 years, you’re buying today for 15 times where the earnings will be 2 years from now. No doubt growth has been boosted a bit by covid and is likely to drop off now to a lower number, but growth was 50% in the year before covid, so…
I guess Facebook’s woes were probably responsible for the almost 10% drop today, since almost a third of Shopify’s sales come from ads on Facebook and Instagram. But the shares are back up close to $900, after hours, in sympathy with Amazon (whose shares are up a stunning 18% after hours, which represents an increase in market cap of over $250b!). Volatility, anyone? But I still think this might be a pretty good opportunity, even if the multiple has now gone from 30 to 33.
PS: Their moat is not as big as you might think - TikToc has shown that new platforms can come in and grow quickly.
Yep. FB and WA are for the olds. Insta has competition from TikTok. Discord is where chat happens for the younger generation around here. Discord CEO walked away from a Microsoft acquisition in 2021, so expect an IPO soon.
I bought Facebook at the IPO and more at $13, then some at $157, then more at $300 just a few days ago. I won’t sell my stock but I do not think Facebook’s issues are small nor temporary. I do not think today’s price is all that great.
Things change and Facebook has got a tough go ahead.
I think Facebook is worth a 5-10% allocation with a 5 year view. It’ll be interesting to see how low it goes.
I also think the Metaverse is an exciting prospect. Esp for remote workers like me. I’m already working from home most of the, working contracts for clients up to 2 hours away. The Metaverse would allow me potentially to work nationwide in 5 years say.
Think work, networking, friends, family, colleagues, virtual events and gatherings, virtual cities? Advertisements, subscriptions, ticket sales (concerts) buying and selling, virtual e-commerce and physical delivery, holidays and experiences. The list goes on.
On a separate note, Grantham’s comments about the confidence termites spreading to the quality names, gains momentum with Meta joining Netflix…who is next Tesla or Amazon? … Amazon jumping on higher earnings in after hours. That clears that up.
Earnings in a given period usually aren’t that important.
But bumping the cost of prime by 17% will certainly help the value of the firm.
Mr Market is pretty rational…occasionally : )
… Shopify. … is trading at ‘only’ about 30 times net income from the last 12 months.
From the Fool’s Matthew Argersinger on twitter:
“I’m no $SHOP expert, but I think the EPS number you’re using includes unrealized gains on equity holdings. On a normalized basis, only accounting for net earnings derived from operations, it trades for about 130 times forward '22 earnings.”
“I’m no $SHOP expert, but I think the EPS number you’re using includes unrealized gains on equity holdings. On a normalized basis, only accounting for net earnings derived from operations, it trades for about 130 times forward '22 earnings.”
If you want to touch and feel SHOP, BABA and FB take a “shopify” course on Udemy.com (< $20). It takes 3 hours of your time.
The whole thing is frictionless. You setup an internet shop with website, product, shipping, billing, branding, target audience, returns in 3 hours. All you need is a computer.
Speaking of a rational Mr Market, can you share any insight as to why the after-hours market has been so kind to a few recently?
I monitor it most evenings and on at least three occasions this year the A shares have traded up ~ $20,000 a share to the low to mid $490,000 which is not reflected in the next open.
It is almost as if Mr Buffett is doing an old friend a favor and easing them out of their position.
I have nothing to gain from writing this, I don’t sell and I just tend to watch stocks move once I buy them. But here’s my view of the not-too-far future:
The Facebook and Paypal type fall will be common for many stocks.
I hear you… however, FB is a trillion $$$ market cap, and went down by $200 B + I find that rather serious. Markets can be inefficient, not that much. This cannot be a regular occurance.
Think through this, the fall in FB value means many mutual funds, sovereign wealth funds, ETF’s, Index etc has to adjust their portfolio. It is nerve wrecking and the volatility has to be far higher.
Separately, 80% of the companies that reported have beat their estimates and generally guided higher or along the current consensus. So I am not expecting many more 20% drop’s. Having said that, I was baby sitting AMZN earnings. Had to enter into a hedge before the earnings.
… Shopify. … is trading at ‘only’ about 30 times net income from the last 12 months.
From the Fool’s Matthew Argersinger on twitter:
“I’m no $SHOP expert, but I think the EPS number you’re using includes unrealized gains on equity holdings. On a normalized basis, only accounting for net earnings derived from operations, it trades for about 130 times forward '22 earnings.”
You are quite right - a lot of last year’s earnings were from unrealized gains on equity investments, primarily its 20 million shares of Affirm (currently worth about $13b). And in fact, those were down substantially in Q4 of 2021 and again so far this quarter, so there will probably be substantial losses in the next couple of earnings reports.
What is more relevant is revenues, operating earnings and their growth, and margins. And on that count, at $890 (market cap $112B), Shopify trades at about 50 times gross profit. Choosing a multiple of operating earnings or net income doesn’t make much sense, since they are just now emerging into profitable operations, as they grow over 50%/year and their fixed costs become less important. But if Argersinger’s guess about 2022 is right, and they are trading at 130 times this year’s earnings from operations ($8.72 eps is the average estimate, or about $1b), and subtracting off their Affirm stake, it means they are at about 100 times this year’s earnings. Given that their revenue is growing about 50% a year, that would mean they could grow into a pretty reasonable multiple in a few years. OK, not the deal of the century, but worth keeping an eye on. (I will be keeping both eyes on it.)
Separately, 80% of the companies that reported have beat their estimates and generally guided higher or along the current consensus.
There was a recent study, cited by my hero Matt Levine, that showed a clear correlation between analysts who do CEOs favors (such as lowballing earnings estimates so CEOs can beat them easily) and business thrown their employers’ (investment banks’) way by those CEOs. Mr Market is smart. So I don’t know if that 80% would be unexpected good news.