Meta Platforms, Inc. (META)

You could buy this one if you're brave. Lots of hidden value.

Court trials and big settlements are largely done. Valuation today pretty attractive. Its data centre buildout is the reason to own. One of the most under-earning data centre companies out there, as they decided to keep excess capacity for themselves. That capacity can either be used to develop great products (adds revenue), or to rent out (again, adds revenue). 

Trades at 14-15x PE. Yield is 0.35%.

It's his largest position. It's down due to the lawsuit about social media addiction among children. Their moat is that half the planet uses Instagram, Whatsapp or Facebook daily. Is there social media addiction? Yes. Are children not developed enough to use them? Yes. Weakness now is an opportunity, as it trades below 20x PE. Strong cash generation. Watch their capex spend--wants to see returns, but has faith in the CEO.

Lawsuits are a real concern. One of the best at selling ads, and AI can enhance that. Ad revenue is growing. No underlying cloud business, but spending so much on AI. Being punished more than they should, they'll figure it out.

It's a 2027 story on compute which will enjoy great tailwinds for the rest of the year.

He was disappointed by their quarter and call. It sounds like the CEO isn't sure whether to use Meta's massive compute power for themselves or rent it to others. Meta didn't seem to have a plan. But shares rose thanks to the Amazon halo, up 6% today.

They just reported a revenue beat, but earnings missed due to a $2.4 billion in legal contingencies. Guidance for this quarter was weak and they narrowed their full-year capex forecast, raising it slightly. Shares are getting killed after hours. The stock is trying his patience. Wants their AI spending to be more creative to monetize Whatsapp

Of the hyperscalers, Meta has the most off-balance sheet debt. This and given the carnage in semis stocks, he wouldn't touch this.

Are concerns about capex spending by Meta and peers. But Meta can increase cash flow because of their consumer base. Can these companies support future capex spending? They would need cash flow support. And within their base business, do they have pricing power, and other businesses that can generate revenue? For Meta: yes to all.

She likes it; it shows Meta being financial savvy and maximizing returns.

They execute. Their PE hasn't been this low since late 2022/early 2023. 

He just bought it as a new buy. For 2 years, there's been criticism of their AI spend, but recently they've gone from blindly spending to a path to revenue though isn't sure if their new Spark 1.1 will be profitable. But they can sell some of their space within their compute, which makes them a competitor to Google and Amazon. He likes how they're branching beyond an ad company.