$META @ $129 - thoughts after watching Meta Connect event
https://www.youtube.com/watch?v=IMwprDVIMbA
$META Connect event - some pretty cool stuff covered in my opinion. Check out the video link below and in the subject title. The market doesnt agree yet - stock closed down 3.9% on the day.
In terms of details from the event, the tie up with Microsoft $MSFT seems very interesting - both Teams and Office 365 will be available virtually within the Oculus VR operating system. Imagine getting your perfect work/screen setup anywhere you like, on-the-go, without any hardware except your headset and perhaps a tiny bit of deskspace to act as a rest for your hands when tapping the virtual keyboard (but not even a must have) - as per image below. No longer do you have to worry about working from a small screen whilst away from your desk setup, or needing to check what kind of desk and IT facilities a hotel has before booking.
$META seems pretty cheap to me on under 10x 2021 earnings, and under 14x consensus 2022 earnings expectations, which have been signficantly lowered as the year has progressed. These low earnings multiples refer to the earnings after the large ongoing investment expenses into VR/AR/Metaverse - but the company could raise the earnings a lot if they decide to bin or reduce such investment due to poor short-term returns.
Anti-trust actions? Sure, but one of the biggest bear theses is also the supposedly unstoppable rise of TikTok. How can the company be both a monopoly and also at existential threat from a competitor? Hmmm. I personally think the Tiktok threat is overplayed (more below), but it will be very helpful for Meta’s lawyers to make much mention of Tiktok in their anti-trust defences. Also, there is the possibility of increasingly harsh geopolitical actions against Tiktok due to its links to the Chinese state. This would of course be helpful for Meta.
Is Tiktok too niche for the average person to post content? I’m sure its not the only thing that people do on Tiktok, but the main content variety is posting choreographed videos synched with music - it seems that not everyone has time or energy to make Tiktok style videos, intertwining elements of such movement and music. Is it fair to say that Tiktok content creation seems more for suitable for influencers than for the common consumer? And of course people can spend time passively consuming content made by more dedicated influencers, but surely there is something more powerful about an app that has more active involvement from a large percentage of its users? As far as my research among young people goes (my wife’s younger sister is 19 for example), none of the youth are replacing Instagram with Tiktok, they are merely adding Tiktok as an extra app. Most of this age cohort use Instagram for posting their personal photos among friends and also for messaging friends, and they use Tiktok more for consuming influencer content.
It seems likely to me that Meta has lots of bargaining chips to play when it is attacked by governments on topics such as anti-trust or data/privacy - it can presumably offer up valuable data sharing for the benefit of anti terrorism (etc) in exchange for leniency on those aforementioned attacks.
What about in the unlikely event that they are forced to sell off major assets due to anti-trust? I personally would not like this outcome since it would reduce enormous long term upside of having all the apps together, but in the short term this could provide a huge catalyst for a stock that is so beaten down?
One of the more concerning things I have read is that the company is having difficulty in hiring and retaining the best developer talent. I think this is partly due to a period of the stock price languishing, but also and perhaps more importantly due to a troubled corporate image after smeer attacks from competitors like Apple. So that's something to look out for as a risk. But when I watch the Connect video I can’t help but think that this must be one of the most attractive companies to work for in terms of the opportunity to contribute to challenging and exciting projects on the cutting edge of tech. And hopefully Zuck's PR appearances on Joe Rogan and such podcasts can help a bit to restore public image too! In all seriousness though, I would like to keep monitoring how this HR dynamic is playing out.
Remember how bearish investors got about $FB around 2018, when the Cambridge Analytica scandal was getting lots of media coverage? This scandal fed into a hype story around a "delete Facebook" campaign that mainstream media would have you believe was about to ruin the company. And yet here we are with the company having grown profits enormously since then, and with both Instagram and blue Facebook performing very strongly in their own respective ways. Are the current fears a re-run of similar investor hysteria?
Advertising revenue growth will suffer both from the weakening economy and from privacy changes from Apple/Google that make tracking and measurement harder. But at this price the company is basically being priced as a zero growth prospect. I like the odds of Zuck & team beating that low bar of expectations over the next 5 years or so.
APPENDIX LINKS
Meta Connect stream
Zuckerberg interview with Joe Rogan from August 2022
Example of mainstream media reporting on Cambridge Analytica and “delete Facebook” campaign in 2018
https://www.cbsnews.com/news/deletefacebook-trends-amid-cambridge-analytica-scandal/
https://www.nytimes.com/2018/04/04/us/politics/cambridge-analytica-scandal-fallout.html
PRICE CHART