No. of Recommendations: 3
I wouldn't buy Meta at any price, because I don't like the management, I don't like how they make money (to me, it often feels like they are damaging democracies and promoting narcissistic behaviour patterns for profit) and I don't like the stock voting/ownership structure (13% owned by Zuck but 57% voting control; you are not an owner so much as 'along for the ride').
I have my doubts about whether they can maintain their share of advertising spends, never mind grow them.
I think it is very difficult to make estimates of future earnings because I remember when e.g. Altavista, MySpace, Yahoo, Hi5, etc. were leaders, and then suddenly, they just weren't. People don't advertise on abandoned sites. That's a risk. It's like banks when confidence is lost, there's a reflexive setup whereby if people think no one else goes there now, they don't go themselves. Network effects work both ways. I have always been gobsmacked by how fast banks fell from 'hundreds of years of stability' to 'wouldn't trust them with a penny!' in 2008. Literally weeks.
I think this is the same kind of situation potentially if you are looking 5 or 10 years out, price estimates have to include some calculation of "% chance it all turns to poo suddenly".
I don't know a single person who enjoys using Facebook or trusts them, regardless of age. I know a lot of people who would cheerfully use any alternative that gains momentum.
In terms of VR, super duper tech, but profitability is less clear and when Apple VR shows up... who will be using facebook VR? VR is a huge roll of the dice for profits. Could be a big win or a big zero. They are showing extreme competence on the hardware side and extreme incompetence on the software/experience side. The problem is that if any company comes along with either a) equally good hardware/price, plus better software or b) better hardware, they will eat Meta's share of VR very rapidly.
They have some really excellent AI researchers. I'm less sure on how they are monetizing it. There is a lot of 'price is free' competition in AI currently.
Next year's earnings are currently estimated at $8 (source: Finviz). People were selling this stock at $90/share just 3-4 months ago. They were selling it for 20% less just days ago. Feels like a poor time to buy.
I don't think earnings/growth/PER as a way of predicting future price is going to be a good guide to the future on a stock so prone to emotional trading, risk of accelerating negative network effects, and with such dominant majority shareholder/CEO control.
A) I question also the PER assigned to the earnings in your post. If FB becomes established as ex-growth - for any reason - the PER ought to be around 10-12x not 20x, in a bear market/recession.
B) Where are 5 years of 12% growth coming from? Facebook are 'huge', like Google they already represent more than a quarter of all ad spending in the world. The number can't go over 100%, and Google have another quarter too. Is spending on total global advertising going to skyrocket during a recession? Can Meta offer adequate return on advertising spends? What will make someone change to Meta who is not using it now?
I think the stock is stinky and risky, I think the numbers for growth/PER are questionable, and I think the error bars around earnings/growth/PER are huge.
