Meta Platforms, Inc. (META)

If/when the economy slows, the big money won't leave the table but shift to other sectors, particularly big tech. Tech tends to outperform in a normal slowdown without much inflation--any tech involving AI and tech replacing expensive workers with cheaper software to raise efficiency. Meta is one example. Once despised, Meta has momentum ever since laying off many of its workers--Zuckerberg was the first to aggressively trim the workforce and forecast an economic slowdown ahead. Meta costs are going down as its sales go up. Instagram, for example, is up 300 basis points. Meta shares seem unstoppable. When SVB collapsed, tech stocks rallied, especially those with an AI kicker.

#2 stock in Q1, up 76%, roaring ever since the CEO started cutting costs, meaning laying off nearly 25% of the workforce recently. Also, its Reels have boosted the stock and is competing with TikTok. Up to 21x earnings, but that's okay because the CEO is cutting costs and that could reignite earnings growth.

He just bought it, though he's overall bearish about the market. Meta trades at 19x at a slight premium to the market. It has great momentum. On down days, its volatility is lower. This is risk-controlled. If TikTok gets banned, this will only add to Meta.

Hated CEO Zuckerberg has been beefing up Reels on Facebook to battle TikTok--and it's working. Also, he's laying off a lot of staff. That's why Meta has been rallying.

Given the TikTok hearings in Washington now, he'd rather own Meta than Snapchat. After TikTok, we'll be watching Meta's Reels. CEO Zuckerberg has invested so much in Reels that it will surpass TikTok anyway.

In the space of just one week--SVB and Credit Suisse meltowns--we've  gone from expecting the Fed from raising rates by 0.5% to cutting. It will be the most-anticipated Fed meeting (next week) in recent meeting. The next move is significant, and we don't know what. Their dilemma: raise or cut? When rates move up, it's hard to make money in stocks. Today, you had to buy food, drug and senior tech stocks like Meta. Drug stocks do well in recessions and pay dividends. Meta just announced a second round of mass layoffs. Billions of dollars in expenses will come out of Meta, while revenue will remain the same. Shares rallied yesterday and today and it's not done yet.

Meta shares now trade around $180, half of its peak in September 2021, but twice as much as the bottom of last Hallowe’en. This year so far, Meta has easily outpaced stalwart megatechs Apple and Microsoft which have climbed about 17% and 6.5% respectively. Meanwhile, Meta has jumped over 50%. The Nasdaq has risen only 7.4%. Read Silver linings in the SVB fall-out for our full analysis.

The PE has moved dramatically down and is now reasonable.

Zuckerberg is the most determined CEO to make money for his shareholders. He has cut spending--operational and capital expenditures.

High beta stock. Changed business plan. Spending $1B a month on the metaverse. Share buybacks, stock went up, but don't be fooled. Company today is not the one he bought, and that's a great reason to sell. 

Bank of America called Meta defensive today. That's ludicrous. Meta is still betting the farm on the metaverse, a great unknown. Neither $118 nor the current $180 share prices are right, though. These megatechs are overbought.

Bought shares as company share price fell.
Expecting share price to appreciate as costs are cut.
$40 billion share buyback will help share price.
Will continue to hold shares.

Shares were off 64% off peak and had a terrible 2022. At end of 2022, the PE was under 15x. Their last quarrer offered a surprising beat, layoffs and a $40 billion big share buyback. It deserves its comeback. He expects some meaningful AI announcement coming.

Shares exploded higher tonight after reporting after the bell. Meta showed growth for the first time in a long time with its core business, Facebok, shower user growth as it cuts costs (layoffs) and plans to dramatically cut costs in 2023. Even Reels is doing well. A very good quarter. 

FANG is dead. Names like Facebook have changed their names, anyway. Meta is a black box and not communicating. Have no idea how they're doing. Is Zuckerberg working on the metaverse, Reels or Instagram? Dunno. Good news is that shares have fallen to levels that are very cheap. If they spun off WhatsApp, the value proposition would be obvious. The only reason to own this for the break-up value.