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2023-12-12

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Meta Platforms: Meta Is At A Turning Point

Meta Platforms, Inc.'s return on invested capital declined in 2022 but is on the rise again.Meta's valuation is relatively low compared to its peers, offering better upside potential.However, they appear to be at a turning point, as the consensus on Meta has changed.Justin Sullivan The Meta Investment Thesis Data by YCharts Meta Platforms, Inc. was one of the best investments in 2023, almost tripling its share price from its lows in January. Driven by cost savings and multiple expansions, shareholders who believed in Meta even after the big selloff in 2022 were rewarded handsomely this year. On the other hand, there were many investors who panicked and sold last year because they were influenced by the very negative news about Meta and its future prospects. Now the media coverage has changed and Meta is again an investment that most people love, and this is a turning point in my opinion. Has Meta's outlook changed that much, or are people just understanding that CEO Mark Zuckerberg is

Meta Platforms: Meta Is At A Turning Point

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{"i18n":{"language":"en_US"},"data":{"magic":2,"id":251304778862872,"tweetId":"251304778862872","gmtCreate":1702362039515,"gmtModify":1702362044695,"author":{"id":3579788727995257,"idStr":"3579788727995257","authorId":3579788727995257,"authorIdStr":"3579788727995257","name":"Westango","avatar":"https://static.tigerbbs.com/3a4b1fc2fb23b33fff900b71df70c49f","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":4,"crmLevelSwitch":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-2","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Master Trader","description":"Total number of securities or futures transactions reached 100","bigImgUrl":"https://static.tigerbbs.com/ad22cfbe2d05aa393b18e9226e4b0307","smallImgUrl":"https://static.tigerbbs.com/36702e6ff3ffe46acafee66cc85273ca","grayImgUrl":"https://static.tigerbbs.com/d52eb88fa385cf5abe2616ed63781765","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.28","exceedPercentage":"80.74%","individualDisplayEnabled":0},"individualDisplayBadges":[],"fanSize":3,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"html":"<html><head></head><body><p>AI meta</p></body></html>","htmlText":"<html><head></head><body><p>AI meta</p></body></html>","text":"AI meta","highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/251304778862872","repostId":2390399612,"repostType":4,"repost":{"id":"2390399612","kind":"highlight","pubTimestamp":1702362924,"share":"https://www.laohu8.com/m/news/2390399612?lang=&edition=full","pubTime":"2023-12-12 14:35","market":"us","language":"en","title":"Meta Platforms: Meta Is At A Turning Point","url":"https://stock-news.laohu8.com/highlight/detail?id=2390399612","media":"Seeking Alpha","summary":"Meta Platforms, Inc.'s return on invested capital declined in 2022 but is on the rise again.Meta's valuation is relatively low compared to its peers, offering better upside potential.However, they appear to be at a turning point, as the consensus on Meta has changed.Justin Sullivan The Meta Investment Thesis Data by YCharts Meta Platforms, Inc.  was one of the best investments in 2023, almost tripling its share price from its lows in January. Driven by cost savings and multiple expansions, shareholders who believed in Meta even after the big selloff in 2022 were rewarded handsomely this year. On the other hand, there were many investors who panicked and sold last year because they were influenced by the very negative news about Meta and its future prospects. Now the media coverage has changed and Meta is again an investment that most people love, and this is a turning point in my opinion. Has Meta's outlook changed that much, or are people just understanding that CEO Mark Zuckerberg is","content":"<html><head></head><body><ul style=\"\"><li><p><a href=\"https://laohu8.com/S/META\">Meta Platforms</a>, Inc.&#39;s return on invested capital declined in 2022 but is on the rise again.</p></li><li><p>Meta&#39;s valuation is relatively low compared to its peers, offering better upside potential.</p></li><li><p>However, they appear to be at a turning point, as the consensus on Meta has changed.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7e7281685854c16f4140bc42739afb9b\" alt=\"Justin Sullivan\" title=\"Justin Sullivan\" tg-width=\"750\" tg-height=\"450\"/><span>Justin Sullivan</span></p><h2 id=\"id_2598368919\">The Meta Investment Thesis</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d3b556a4b2e4ea31dfce62e2a126cec0\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"435\"/><span>Data by YCharts</span></p><p><strong>Meta Platforms, Inc.</strong> (NASDAQ:META) was one of the best investments in 2023, almost tripling its share price from its lows in January. Driven by cost savings and multiple expansions, shareholders who believed in Meta even after the big selloff in 2022 were rewarded handsomely this year. On the other hand, there were many investors who panicked and sold last year because they were influenced by the very negative news about Meta and its future prospects.</p><p>Now the media coverage has changed and Meta is again an investment that most people love, and this is a turning point in my opinion. Has Meta&#39;s outlook changed that much, or are people just understanding that CEO Mark Zuckerberg is in it for the long haul? Do people now see investing in the metaverse - and all the other inventions that come with it - as something positive, instead of a billionaire&#39;s money-burning idea?</p><p>I think Meta&#39;s labs have a lot of surprises in store for the future, and maybe they even have something like Amazon.com Inc.&#39;s (AMZN) AWS up their sleeve. It would be odd if they could not find great opportunities in the metaverse and artificial intelligence (&#34;A.I.) with the large investment they are making. And they have some of the best scientists and experts in the world in this field.</p><h2 id=\"id_3039568673\">Meta&#39;s Metrics and Balance Sheet</h2><p>Meta&#39;s balance sheet is rock solid. Long-term debt is only $18,383 million, while cash alone is double that at $36,890 million. In addition, TTM&#39;s net income is $29,734, which is also greater than long-term debt. One could even argue that Meta could use a little more leverage, but with ROIC and ROE already excellent, there is no need. When debt is below 4x net income, I consider a company safe from a balance sheet perspective, and Meta is below 1x, which in my eyes makes it very secure.</p><p>Meta&#39;s free cash flow position is also very strong, giving them plenty of room to invest in growth and hopefully return more cash to shareholders in the future.</p><p>FCF TTM: $36,793m.</p><ul style=\"\"><li><p>$13,639m Q3/23.</p></li><li><p>$10,955m Q2/22.</p></li><li><p>$6,911m Q1/23.</p></li><li><p>$5,288m Q4/22.</p></li></ul><p>I think we need to adjust this number for SBC, and there we have the following numbers:</p><ul style=\"\"><li><p>SBC YTD 9 Months: $10,603m.</p></li><li><p>SBC Q4/22: $3,008m.</p></li></ul><p>SBC TTM: $13,611mSo the SBC adjusted FCF is $36,793m - $13,611m = <strong>$23,182m.</strong></p><p>In the long run, I think the SBC adjusted numbers have the potential to be over $30 million as Meta&#39;s bets and investments pay off. What&#39;s App in particular has great potential. In general, Meta is a money-printing machine with an incredibly strong balance sheet. They would be able to weather crises that other companies are not prepared for.</p><h2 id=\"id_912032819\">ROIC Vs. Competition</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e299d60ba368cf366b10542ef0a66d1b\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"518\"/><span>Data by YCharts</span></p><p>For peer comparisons, we use the usual suspects, Microsoft Corporation (MSFT), Alphabet Inc. (GOOG) (GOOGL), NVIDIA Corporation (NVDA), Amazon.com, Inc. (AMZN), and Apple Inc. (AAPL), as they are the closest in terms of market capitalization and there are many overlaps in their businesses. And up until Amazon, they all have fantastic returns on capital. Meta, on the other hand, saw a slight decline in ROIC due to investments in 2022, but it is on the way back up.</p><p>With a cost of debt of about 5% and a cost of equity of about 8%, I arrive at an approximate WACC of 8% for Meta. This results in a very favorable ROIC-WACC spread of 12%. This clearly shows that Meta is creating value, and if you are someone who believes that share price will follow return on capital over the long term, then Meta should be attractive to you. Because I think there is no argument that they will not continue to be as effective capital allocators.</p><p>High barriers to entry, as well as scale and network effects, are likely to protect earnings. Further share repurchases at potentially more opportune times, as in the past, would also enhance shareholder returns.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/55cbab6fe018b66735ffc5a079bf38d5\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"453\"/><span>Data by YCharts</span></p><p>Large share repurchases at high prices in the past reduced the share count by ~200 million, but high stock-based compensation, or SBC, costs led to a resurgence last quarter. Therefore, share repurchases are likely to be used to offset SBC rather than to significantly reduce shares outstanding. Dividend payments are also unlikely to be forthcoming, so shareholder returns will be driven primarily by earnings growth resulting from high capital returns and new growth opportunities.</p><h2 id=\"id_2366253596\">Valuation Vs. Competition</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/91d9777ce20407fb4a7c3e8124e54fa7\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"518\"/><span>Data by YCharts</span></p><p>I always take an EV/EBIT multiple rather than a P/E ratio because we can include debt by using enterprise value. And here we can see that Meta and Google are the cheapest of the peer group. Probably because some people see AI as a threat to the search engine business, and Meta has the Metaverse that many do not like. In addition, TikTok also has an influence on the valuation of Meta.</p><p>However, a multiple of 21x is fair considering the EBIT growth rate of 34.21% over the last 10 years. One could even argue that the multiple is too low if they can achieve the same growth rate in the future. Compared to its peers, Meta&#39;s shares are attractively priced and offer better upside due to the lower multiple and resulting better margin of safety.</p><h2 id=\"id_1233638885\">Meta&#39;s Reverse DCF</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8a622bd65c3211a3e6711a860f9e705d\" alt=\"Author\" title=\"Author\" tg-width=\"640\" tg-height=\"67\"/><span>Author</span></p><p>Over the last 4 quarters, the following diluted EPS figures have been reported.</p><ul style=\"\"><li><p>$4.39 Q3/23</p></li><li><p>$2.98 Q2/23</p></li><li><p>$2.20 Q1/23</p></li><li><p>$1.76 Q4/22,</p></li></ul><p>diluted EPS TTM: $11.33.</p><p>If we take that number and put it into a reverse discounted cash flow, or DCF, to see what is priced into the stock, we can see that EPS is currently priced at a compound annual growth rate of about 13% over the next 10 years. Over the past 10 years, Meta has achieved a compound annual growth rate of 40.15%, which is well above the required growth rate. Over the last 5 years, however, the growth rate was &#34;only&#34; 11.25%, so below the required level.</p><p>However, since the last 5 years have been marked by a lot of investment, I would argue that the next 5 years will probably look better than the last 5 years in terms of growth rate and, therefore, the stock is fairly valued.</p><h2 id=\"id_2414962326\">What could EPS look like in 5 years?</h2><p>I think there is a relatively high probability that we can see $20 diluted EPS in 5 years and, therefore, the stock will trade at about $500 if we take a 25x multiple. This would correspond to an EPS growth rate of approximately 12%. If the investments bear fruit within this period, $25 EPS and a share price of $625 are also possible. If Meta starts to see success with its huge investments, shareholders will be rewarded.</p><p>So, at the current price, a 5-year double-digit annual return is achievable and the chances of beating the long-term CAGR of the S&amp;P 500 of ~10% are good. Growth opportunities are plentiful, and share buybacks combined with lower SBC costs could boost total stock returns.</p><h2 id=\"id_1604188979\">Is Meta A Buy, Hold or Sell?</h2><p>I bought some more shares in Meta this month, but only because I always follow Peter Lynch&#39;s advice in December to water the flowers. However, I wouldn&#39;t have bought Meta if December hadn&#39;t been the month I put my money into my best investment ever from an IRR standpoint. Since I have been continuously adding in 2022 and 2023, I have had much more attractive entry points.</p><p>In general, I&#39;d say Hold would be a better choice for Meta Platforms, Inc. stock because there&#39;s a lot of uncertainty about the whole investment in the metaverse bet and how they&#39;re going to monetize What&#39;s App and AI. And depending on the size of the investment in the metaverse, I think there could be some selloffs in the future to give investors another opportunity to buy shares of this wonderful company at an even better EV/EBIT multiple.</p><p>In this sense, water the flowers and cut the weeds.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Meta Platforms: Meta Is At A Turning Point</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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(NASDAQ:META) was one of the best investments in 2023, almost tripling its share price from its lows in January. Driven by cost savings and multiple expansions, shareholders who believed in Meta even after the big selloff in 2022 were rewarded handsomely this year. On the other hand, there were many investors who panicked and sold last year because they were influenced by the very negative news about Meta and its future prospects.Now the media coverage has changed and Meta is again an investment that most people love, and this is a turning point in my opinion. Has Meta's outlook changed that much, or are people just understanding that CEO Mark Zuckerberg is in it for the long haul? Do people now see investing in the metaverse - and all the other inventions that come with it - as something positive, instead of a billionaire's money-burning idea?I think Meta's labs have a lot of surprises in store for the future, and maybe they even have something like Amazon.com Inc.'s (AMZN) AWS up their sleeve. It would be odd if they could not find great opportunities in the metaverse and artificial intelligence (\"A.I.) with the large investment they are making. And they have some of the best scientists and experts in the world in this field.Meta's Metrics and Balance SheetMeta's balance sheet is rock solid. Long-term debt is only $18,383 million, while cash alone is double that at $36,890 million. In addition, TTM's net income is $29,734, which is also greater than long-term debt. One could even argue that Meta could use a little more leverage, but with ROIC and ROE already excellent, there is no need. When debt is below 4x net income, I consider a company safe from a balance sheet perspective, and Meta is below 1x, which in my eyes makes it very secure.Meta's free cash flow position is also very strong, giving them plenty of room to invest in growth and hopefully return more cash to shareholders in the future.FCF TTM: $36,793m.$13,639m Q3/23.$10,955m Q2/22.$6,911m Q1/23.$5,288m Q4/22.I think we need to adjust this number for SBC, and there we have the following numbers:SBC YTD 9 Months: $10,603m.SBC Q4/22: $3,008m.SBC TTM: $13,611mSo the SBC adjusted FCF is $36,793m - $13,611m = $23,182m.In the long run, I think the SBC adjusted numbers have the potential to be over $30 million as Meta's bets and investments pay off. What's App in particular has great potential. In general, Meta is a money-printing machine with an incredibly strong balance sheet. They would be able to weather crises that other companies are not prepared for.ROIC Vs. CompetitionData by YChartsFor peer comparisons, we use the usual suspects, Microsoft Corporation (MSFT), Alphabet Inc. (GOOG) (GOOGL), NVIDIA Corporation (NVDA), Amazon.com, Inc. (AMZN), and Apple Inc. (AAPL), as they are the closest in terms of market capitalization and there are many overlaps in their businesses. And up until Amazon, they all have fantastic returns on capital. Meta, on the other hand, saw a slight decline in ROIC due to investments in 2022, but it is on the way back up.With a cost of debt of about 5% and a cost of equity of about 8%, I arrive at an approximate WACC of 8% for Meta. This results in a very favorable ROIC-WACC spread of 12%. This clearly shows that Meta is creating value, and if you are someone who believes that share price will follow return on capital over the long term, then Meta should be attractive to you. Because I think there is no argument that they will not continue to be as effective capital allocators.High barriers to entry, as well as scale and network effects, are likely to protect earnings. Further share repurchases at potentially more opportune times, as in the past, would also enhance shareholder returns.Data by YChartsLarge share repurchases at high prices in the past reduced the share count by ~200 million, but high stock-based compensation, or SBC, costs led to a resurgence last quarter. Therefore, share repurchases are likely to be used to offset SBC rather than to significantly reduce shares outstanding. Dividend payments are also unlikely to be forthcoming, so shareholder returns will be driven primarily by earnings growth resulting from high capital returns and new growth opportunities.Valuation Vs. CompetitionData by YChartsI always take an EV/EBIT multiple rather than a P/E ratio because we can include debt by using enterprise value. And here we can see that Meta and Google are the cheapest of the peer group. Probably because some people see AI as a threat to the search engine business, and Meta has the Metaverse that many do not like. In addition, TikTok also has an influence on the valuation of Meta.However, a multiple of 21x is fair considering the EBIT growth rate of 34.21% over the last 10 years. One could even argue that the multiple is too low if they can achieve the same growth rate in the future. Compared to its peers, Meta's shares are attractively priced and offer better upside due to the lower multiple and resulting better margin of safety.Meta's Reverse DCFAuthorOver the last 4 quarters, the following diluted EPS figures have been reported.$4.39 Q3/23$2.98 Q2/23$2.20 Q1/23$1.76 Q4/22,diluted EPS TTM: $11.33.If we take that number and put it into a reverse discounted cash flow, or DCF, to see what is priced into the stock, we can see that EPS is currently priced at a compound annual growth rate of about 13% over the next 10 years. Over the past 10 years, Meta has achieved a compound annual growth rate of 40.15%, which is well above the required growth rate. Over the last 5 years, however, the growth rate was \"only\" 11.25%, so below the required level.However, since the last 5 years have been marked by a lot of investment, I would argue that the next 5 years will probably look better than the last 5 years in terms of growth rate and, therefore, the stock is fairly valued.What could EPS look like in 5 years?I think there is a relatively high probability that we can see $20 diluted EPS in 5 years and, therefore, the stock will trade at about $500 if we take a 25x multiple. This would correspond to an EPS growth rate of approximately 12%. If the investments bear fruit within this period, $25 EPS and a share price of $625 are also possible. If Meta starts to see success with its huge investments, shareholders will be rewarded.So, at the current price, a 5-year double-digit annual return is achievable and the chances of beating the long-term CAGR of the S&P 500 of ~10% are good. Growth opportunities are plentiful, and share buybacks combined with lower SBC costs could boost total stock returns.Is Meta A Buy, Hold or Sell?I bought some more shares in Meta this month, but only because I always follow Peter Lynch's advice in December to water the flowers. However, I wouldn't have bought Meta if December hadn't been the month I put my money into my best investment ever from an IRR standpoint. Since I have been continuously adding in 2022 and 2023, I have had much more attractive entry points.In general, I'd say Hold would be a better choice for Meta Platforms, Inc. stock because there's a lot of uncertainty about the whole investment in the metaverse bet and how they're going to monetize What's App and AI. And depending on the size of the investment in the metaverse, I think there could be some selloffs in the future to give investors another opportunity to buy shares of this wonderful company at an even better EV/EBIT multiple.In this sense, water the flowers and cut the weeds.","news_type":1},"isVote":1,"tweetType":1,"viewCount":258,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}