Meta Platforms, Inc. (META)

Meta has an uncanny ability to come out with new products. But the one problem with Meta--the UK just banned social media for children under 16. If this ban expands--and he thinks it will--it will hurt their ad revenue. Overall, Meta is spending on AI which maintains their lead over their peers.

It has underperformed the AI trade, but is crazy profitable. Will earn $30 EPS this year at under 20x PE. It has proven that AI is accelerating its business. Unlike peers, Meta is not re-selling its compute, but using it for itself. The market was scared when Google said it was selling $80 billion of shares so there were rumours Meta would do the same. He doubts it. The market is stunned by Meta's AI spend, but the growth is there. He expects strong revenue growth this quarter.

He's looking at it. (His limit order missed in March by ~$5, but as value managers they don't chase. May get another chance. :) Likes the platform. Market's a bit concerned about how much it's spending, and it may have to cut back on things the market can't see being monetized soon. 

Another 10-15% drop, and he's going to take a stab at it; likes it for the long term. Right now, the price doesn't provide that margin of safety.

He likes all the hyper-scalers but META has only an 18X PE ratio and has the best upside over the next 12 months. It has had the most incremental advertising dollars over the past five years and is growing its business. Has $250 billion in revenue. It is down because investors feel it is spending too much on AI. It is using AI already in its core business and expanding it to new products. Should be the biggest beneficiary of the AI rollout.
Buy 71  Hold 8  Sell 0

Financial results were excellent. But $125B in spending this year (at the low end), and CEO has been vague about where returns will be seen. Sales up 30% last quarter, clearly benefiting from AI (content recommendations and ad targeting).

Noteworthy is that they keep all compute for themselves, and don't sell to others. This avenue could be monetized in future.

They had 33% growth in the last quarter, the fastest in 5 years when revenues were $29 billion compared to $56 billion now. They have a record 3.5 billion daily active users and adding giant data centres and spending $150 billion.

AI spending is going to get to a point that the market just won't accept. As long as share price continues to be "OK", these companies will keep spending.

Problem here is that it's spending almost all of cashflow on capex, now outspending its own profitability. Started taking on debt. May not matter right now, but sometime it will.

He just bought a lot more yesterday. Extremely reasonable valuation around 16-17x PE. Revenues growing an incredible 30%, which is hard to find in such a big company. 

The street will eventually reward it. Problem is that its vision isn't properly articulated. Behind on learning-language models.

Meta has the biggest question mark in the megatechs because they don't have a direct link between a public cloud to sell credit credits against to offset their large capex.

They just reported. He didn't like to hear that they raised capex by 10%. Then again, they had the fastest revenue growth in 5 years, so maybe they should spend, though he'd like more justification on that spend. Revenues are up 30%.

His choice among the Mag 7 because of where it's trading. Fell on eye-popping AI concerns and legal challenges. Whole tech sector swooned. Cut workforce 10%, scrapped plans to hire. 

He is concerned about the lawsuits, but it's something they'll have to get through and write some really big cheques. Like tobacco. Already priced into the stock.

Leadership is smart. Capex is high, but bolstering position in AI. Trades ~17x PE  and growing 17%. Yield is 0.32%.

Trades inexpensively ~21x PE, around market multiple. Yet growth rate is considerable. The low multiple allows the stock to absorb any potential disappointment.