The market suffered pretty badly last week highlighted by Netflix’s fall from FAANG grace. IMO this has dragged some great stocks irrationally down more than they should be, FB being one of them. There are stark differences between FB and NFLX, mostly being the fact that FB literally prints money and is trading at a lower PE than NFLX.
FB is also going after the metaverse market, which while everyone shits on, may be the next big thing. Despite ethical concerns and all that, majority of the people will not give a shit if cheap, good, entertainment is available to them. We all know the issues of Social media, and there was and still is a whole security scare around Tik Tok, yet we know what is most popular. Facebook has made great strides in the VR market and their hardware tech has been extremely impressive proven by the fact that the Oculus 2 was sold out for a while. They have a new headset geared towards the higher end market (Cambria), and from initial reviews from testers it sounds very good.
Besides the VR/Meta market, the cash cow of FB/Meta advertising is still a thing. Anecdotally, I work for a advertising company and I have seen the anticipated forecast within FB to still grow double digits YoY.
Basically FB prints money and has the financial means of breaking into the metaverse market. They have already proven they have the technical knowledge to bring VR to the masses at a low price point.
I’m on the other side of this. I think Metaverse has been an expensive money sink with very little fan fare. I think poor user numbers are gonna hit it hard on ER. Even outside of that, FB user base is dwindling. Russia banned it, and even though they ranked #6 in most used social media networks in Russia, it’ll still be a hit to their numbers.
I agree that their financials are solid, but I’m basing this on a pure sentiment type play. I think guidance and overall user numbers will be poor. I don’t think this is another Netflix by any means, but could very well have a decent sell off. I’ll pick up a smallish put position but I’m definitely gonna hedge it just in case.
What I’m finding interesting about FB right now is the fact that increase user monthly active users seems to be slowing down. If this trends keeps going then I’m expecting worse guidance.
Although, FB/Meta also owns Instagram and Whatsapp. Something to keep in mind.
And this is happened before any of the recent global events.
I too am on the other side of this trade. I’m holding 10 of the 5/20 150p at an average of $3.44. I will likely close them before earnings or let 1-2 ride through as a pure gamble after covering cost basis and securing a bit of profit.
I appreciate yours and everyone’s insights. I do hope you make money, but honestly for the sake of everyone I do hope FB goes nowhere near your $150 mark. I think a majority of FB troubles have been priced in. At that price point we may be entering recession level territory and that won’t be good for most of our portfolios as a whole (unless some smart ass is holding cash right now)
FB up over 17% AH after earnings. IMO it wasn’t much of an earnings beat, but the important thing was that FB proved they aren’t a “dying” company which is where they were beginning to be priced at (especially the 6% drop when “guidance” was leaked).
Advertising revenue by user geography, and revenue by user is down in all segments quarter over quarter, and in some instances year over year. This is notable because up until recently, Meta was a massive cash generator in their advertising business.
Metaverse expenses are rising across the board — most notably in R&D and Cost of Revenue. So Meta is now a company with declining revenues and a counter trend of increasing expenses.
The quarter over quarter decline remark is disingenuous and expected for advertising. YoY they grew (admittedly small). Majority of companies, but especially advertising will have the majority of their revenue in Q4 given the holiday season and end of year spending.
Now if their Q4 results declined over Q3 without a good reason, then FB would officially be dead and the stock will decline another 25%. While R&D costs were a concern, the results for Q1 and guidance for this year was lower than expected so investors were happy. Overall, I think it is a good thing FB is innovating, they realize their moat for advertising may be declining so they are building the next big thing.
A lot of people shit on the metaverse, but don’t really provide good reason for it other than “it’s just a video game” or “it’s been done before”. I don’t think any of us know where the next 10 years can look like. If you asked me when a standalone, affordable, wireless VR headset would be released 10 years ago, I’d say 2030. Yet Oculus was able to do this way ahead of schedule.
Kids are spending more and more time in the “virtual world”, mostly video games like Minecraft and Roblox. (Screen time by age) Roblox itself is considered the Metaverse. Now imagine FB is able to build this metaverse and the next generation of kids growing up has access to this relatively cheap, amazingly immersive environment that is exactly what they grew up with. This next generation of kids who will be entering the workforce and become the next biggest cohort for all companies who produce anything. Now imagine FB walks in and says, I can provide you all the data on these people where I have been building their personal user profile for over a decade, where they spend hours everyday in an environment where I control. Scary? Yes. But extremely lucrative? Also yes.
I don’t agree with the disingenuous statement at all. FB matched its q3 2021 revenue which is noteworthy. Further, they are projecting .5bb in revenue growth next quarter.
FB increased its ad rate in its apps by nearly 100%, and it’s ARPU May not ever recover. What is disingenuous is to present growth when in reality they’re increasing impressions and hemorrhaging profit per impression.
Finally, end of year (or peak as we say in ads) is primarily retail focused. There are major industries/sectors which advertise all year long (examples: Super Bowl, car sales events, entertainment feature launches, prime day).
Source: I work in ads. Happy to discuss further
Edit: app downloads are the least profitable segment of advertising. Often using remnant inventory and their audience requirements are extremely strict. They want to pay the least and only want the whale spenders. As you can imagine, they self pare down their revenue potential significantly.
I’m curious where you got this from? I could not find this anywhere and I find this hard to believe.
While you are correct certain industries advertise year long, the majority of advertising is still focused towards Q4. I also work in advertising and I have a unique position where I get to see the total Digital ad spend across the majority of my company’s holding agencies, which is one of the largest in the world without divulging too much info By far Q4 is the largest ad spend quarter.
I’m not really sure what you’re going by this, I do agree, but not sure how it pertains to Facebook who have branding advertisers.
Final nail in the coffin for my previous comment on Meta being a money bleeder? Zuckerberg outright said it himself.
Mark Zuckerberg told shareholders that creating the metaverse will bleed money for three to five years.
The Meta CEO told the company’s annual meeting that some products wouldn’t be ready for 15 years.
The Facebook owner spent $10 billion on the idea of an immersive virtual world in 2021 alone.
Shareholders aren’t entirely happy with this all-in approach on Metaverse.
At Wednesday’s meeting, 12 shareholder proposals were rejected. Zuckerberg still holds a controlling stake in Meta.
One called for Meta to commission a report and hold a shareholder vote on whether the “continued implementation” of the metaverse was “prudent and appropriate.”
Former and current Facebook employees told Insider in April that Zuckerberg is interested in little except the metaverse but lacks a coherent strategy for the project he regards as the future of the internet.
“While we are pleased to see that Meta recognizes the value of haptics and has adopted our haptic technology in its AR/VR systems as part of its multi-billion dollar effort to create the metaverse and generate revenue streams through the sales of hardware, games and other virtual assets, and advertisements, it is important for us to protect our business against infringement of our intellectual property to preserve the investments that we have made in our technology,” added Mr. Jose. “We must ensure that our intellectual property is recognized as a necessary feature in the emerging AR/VR/metaverse market, even when litigation becomes necessary.”
