Meta Platforms, Inc. (META)

Down 15% this year though the QQQ is up 15% because the chip stocks have become a bigger weighting. Meta is not executing and pivoting on a daily basis. Meta is burning money, figuring out what to do, but should focus on Instagram, Facebook and WhatsApp and their glasses. Those areas are doing great.

Not expensive, trading at 17x PE, gross margins of 82% and operating margins of 41%. But it's spending alot of money, and it lacks a cloud business, unlike its peers. AI is increasing their revenues to engage and shop more.

Massive user base, 40% of the world uses its platforms. Market sentiment towards them has been negative for quite a while. Relative to growth outlook, attractively valued at 17x PE, with a very healthy free cashflow yield (north of 3%). As they monetize premium subscriber features, even a small success rate would have a massive impact on revenue and profitability. Tremendous value, one to consider.

It is 30% off its highs and trading at 18X earnings which is below the market multiple. He estimates that it is going to grow in the high teens in terms of percentage growth of EPS in the foreseeable future. It is undervalued over concerns about spending a lot of money on data centre development but the return is coming back to META. They know what they are doing and the research shows that returns will be there. The question is what size will they be. He thinks a home run.      Buy 74  Hold 6  Sell 0

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.