Everyone’s Scared of META… But I Ran the Numbers

About this video

• Video Title: Everyone’s Scared of META… But I Ran the Numbers
• Channel: Dividend Compounders with Cheese
• Speakers: Amos
• Duration: 47:38

Overview

This video provides a detailed analysis of Meta Platforms (Facebook), exploring its current financial health, historical performance, and future potential. The speaker argues that despite current market fears and significant capital expenditure on AI, Meta is undervalued and presents a compelling investment opportunity. The analysis covers Meta's revenue streams, earnings, debt, market position, and speculative future strategies, concluding with a comparison to other tech giants and a personal rating of the company.

Key takeaways

• Poll Results: Meta was the top choice in a viewer poll for a stock deep dive.
• Current Performance: Meta's year-to-date performance is 3.7%, significantly lower than other "Magnificent Seven" stocks, with recent dips in the past week and month.
• Historical Investment: The speaker previously invested heavily in Meta when its stock was around $100 per share in 2022, selling for a significant profit.
• Business Model: Meta is primarily an advertising business, with smaller contributions from Reality Labs (VR) and subscription tools.
• Adaptability: Meta has a history of successfully adapting to industry disruptions, such as introducing Instagram Stories in response to Snapchat's popularity and creating Threads in response to Twitter.
• Recent Earnings: Meta's Q3 earnings showed strong revenue growth (26% YoY), but missed bottom-line expectations due to aggressive AI capital expenditure (CapEx) and increased SG&A for talent acquisition.
• AI CapEx Concerns: The company plans to spend heavily on AI infrastructure ($600 billion+ by 2028), but the lack of a clear 2026 CapEx forecast and a defined endgame caused market concern.
• EPS Adjustment: The reported EPS was impacted by a one-time, non-cash tax adjustment, which artificially lowered net income. After adjusting for this, the actual EPS was $7.25, showing a healthier picture than initially reported.
• Valuation: Meta's current and forward PE ratios are considered low compared to its historical average, suggesting undervaluation.
• Compounder Chart Rating: Meta is rated as an A+ company, just shy of S-tier due to the uncertainty surrounding its AI investment strategy.
• Comparison: Meta is compared favorably to other Mag 7 companies due to its advertising dominance but is distinguished by its lack of a cloud computing business.
• Undervalued Opportunity: The speaker believes Meta is the most pound-for-pound undervalued stock among the Mag 7 currently, despite the risks associated with its AI spending.
• Future Speculation: Potential future monetization strategies for AI spending include in-glasses advertisements and integration into the metaverse.
• Comparison with The Trade Desk: The speaker is also considering investing in The Trade Desk (TTD) as another strong contender.
• Personal Update: The speaker shares personal updates about being a new father and the challenges and joys that come with it.