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They just reported a disappointing quarter, plunging shares 18%. Many are giving up on it, but it's a buying opportunity. For decades, this was a reliable growth stock, but in the past 5 years have been sideways. They reported beats and raises last year. They sold their life sciences division to unlock value, a smart move. But at the same time, they issued mixed guidance, including slightly lower earnings due to tariffs; they said they would have made their guidance if not for the tariffs. Trades at a low 12x this year's estimates and have bought back many shares already this year.
Has incredible gross margins. They just reported a fine quarter, but tariffs in China didn't help. The street perceives that as the last great quarter, so shares fell. Apple is trying to move production from China to India but who know how long it will take. Services revenue disappointed and a monopoly lawsuit doesn't help.
META has a dominant market position in social media, its monthly active users exceeds 3 billion, and it is investing in AI. It is a cash flow machine, generating $52B in free cash flow over the past 12 months, it has grown sales by 19% over the past 12 months, and earnings growth is 47% over the past 12 months. It is currently priced at 23.7X forward earnings, which for a company rapidly growing sales and earnings, we feel is fairly cheap, although it can be cyclical depending on enterprise ad budgets.
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EPS of $1.62 beat estimates of $1.02; revenue of $250M missed estimates of $255M. EBITDA of $80.8M matched estimates. Revenue rose 8.1%. Earnings rose 56%. Commentary implied that 'more goods would be coming into Canada from around the world to mitigate the uncertainty of tariffs'. The stock had a good bounce on the news but remains down 20% YTD. It is decently-priced at 14X earnings but there is still some economic risk here. We think $83 would be a decent price.
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EPS of 9c crushed estimate of 6.3c; Revenue of $102.2M beat estimates of $84.9M. EBITDA of $26.5M beat estimates by 13%. Revenue rose a robust 39%, EBITDA rose 37%. Commentary was good, with the company focused on both organic growth and acquisitions, and it continues to buyback stock. Debt is still on the high side but these results were solid. The stock is down 14% this year, but we think these results should get it a bit of attention. As a small, cyclical company there remains risks here, and it is more expensive at 15X earnings than many others. But we would see it as a reasonable, though higher risk, buy for small cap investors only.
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Regret Aversion: Buying Too High & Selling Too Low
The fear of buying too high when the markets are plummeting and selling too early when the markets are reason can both be attributed to what is called the regret aversion bias. When markets are rising, investors may become hesitant to sell some of their positions out of fear of regretting this decision later on, in the event that markets continue to rise. Conversely, when the markets are declining, investors can have a fear of buying too soon and regretting not purchasing at a lower price point. While both forms of regret (not selling at the highs and not buying at the lows) can be painful for an investor, there is a common belief that higher emotions are associated with financial loss than financial gains. To demonstrate this, a behavioural finance study concluded that investors prefer to avoid a loss more than acquiring an equivalent gain. The study used the example that when given the choice of receiving $900 or taking a 90% chance of gaining $1,000 (a 10% chance of gaining nothing), most investors would opt out of risking the higher gain of $1,000 and would take the guaranteed $900. Both outcomes are virtually the same ($900 vs. 90% X $1,000 = $900). On the other hand, when those same people were given the choice between losing $900 or taking a 90% chance of losing $1,000, most investors opted to take the 90% risk and attempt to avoid the loss.
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It reports Monday. He's a little concerned. They've worked to mitigate the tariffs. He hopes they can break their streak of so-so quarters.