Back in October 2022, Meta was trading at $99/share… and the company was priced like it was going out of business.
Since then it’s run up 400%+ and become a $1 trillion company once more…
But we’re now down 25% from highs… and the sentiment couldn’t be more bearish.
I even saw one moron state that Mark Zuckerberg “is deliberately turning the company into the next Yahoo”
Even if you ignore that Meta’s annual revenue is more than double Yahoo’s peak market cap… it’s an astoundingly dumb statement.
But I get it… it’s an easy company for commentators to throw rocks at.
Zuckerberg is no Steve Jobs, Jeff Bezos or Elon Musk… nor does the company have the adult-in-the-room reputation that Microsoft and Google both possess.
So it’s always been the odd one out when it comes to the MAG7.
Leaving it in this weird catch-22 situation where if Meta spends at lot on CAPEX they get punished… but if they started pulling back CAPEX spending they’d be punished more.
Because when I look at it… Microsoft and Meta’s reports were very similar - yet the former jumped 8% while the latter fell the same amount
Meta’s core offering (Family of Apps) is STILL growing, even though it’s now sitting at 3.6 billion daily active users.
The 1-2 punch of increased ad impressions and increased cost per ad are both growing double digits…
So the AI CAPEX is clearly paying off…
And the ads business is no longer under existential threat like it was in 2021/2022 with the iOS updates and the challenge from TikTok…
The one actual point of concern is these lawsuits. Meta paid $2.1 billion this quarter to settle suits in Kentucky, and if this sets a precedent where every single state goes after them a la big tobacco… then that would shift my opinion.
But remember this, Meta can turn off the CAPEX faucet whenever they want… and what’s left is an insanely profitable company (which you can’t say for MSFT/GOOG/AMZN because they have a cloud division arms race to fund)
That, combined with the upside from said CAPEX means buying this company at 22x earnings is one of the best risk/reward investments in the market today
I remain bullish
Oliver