Is Facebook DEAD? 3 Questions To Ask Before Buying/Selling Facebook's Stock (Meta Stock Analysis)

Is Facebook DEAD? 3 Questions To Ask Before Buying/Selling Facebook's Stock

Last week, Facebook / Meta Platforms lost $250 billion in market cap. This was the largest one-day market cap decline in stock market history. Now does this massive stock price decline offer an opportunity for long-term investors? Is Facebook / Meta Platforms now a wonderful business at a wonderful price as Buffett would say? Or is Facebook / Meta Platforms just a value trap as its underlying value has fundamentally changed?

What has led to this record-breaking 250 billion Facebook stock sell-off? Why did the market react so negatively to Facebook's earnings? There are three things you need to be aware of: There are the Apple IDFA changes, there’s increased competition, namely in the form of TikTok, and there's Facebook’s & Mark Zuckerberg's planned multi-billion-dollar investment in the Metaverse.

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OTHER LINKS:
○ The Street Snap Article: https://www.thestreet.com/markets/snap-stock-soars-on-q4-profit-beat-ad-sales-user-growth-surprise
○ Statista digital ad spending: https://www.statista.com/chart/22286/ad-spend-us-digital-traditional-split/
○ Facebook IR slides: https://s21.q4cdn.com/399680738/files/doc_financials/2021/q4/Q4-2021_Earnings-Presentation-Final.pdf
○ Gamedeveloper IDFA Article: https://www.gamedeveloper.com/business/analyst-only-6-of-ios-14-5-users-chose-to-opt-in-to-ad-tracking-so-far

Facebook investors need to ask themselves why they would consider investing in Facebook or Meta in the first place. What’s your Facebook investment thesis? : I think if you’re betting on Facebook, you are first and foremost betting on Facebook's CEO Mark Zuckerberg. Moreover, you also believe that Facebook is one of the best advertising businesses in the world and digital advertising as a whole will continue to win market share from traditional advertising avenues.

However, Facebook has for the first time seen a decline in daily active users, but you are certainly also betting on a better monetization of each user over time, so an increase of Facebook’s average revenue per user.

This is Facebook’s core business: digital advertising. Facebook is incredibly profitable, generates high margins, it’s producing a ton of free cash flow, it’s capital-light, and the industry itself is growing. And the advertising business basically represents 99% of Facebook's global revenue. Now, part of an investment thesis in Facebook is probably also that you get a lot of free options on top of Facebook’s digital advertising business: WhatsApp isn’t really monetized yet, there is payment, Facebook recently rolled out WhatsApp payments in India, there are opportunities in e-commerce, and of course there are opportunities in the augmented and virtual reality space (AR VR).

MUSIC:
○ https://www.epidemicsound.com/track/FdhMx1Fqcj/

Chapters:
0:00 Into
0:44 Why Facebook’s stock plummeted
1:12 Investment thesis
3:06 Free Optionalities?
3:35 Valuation multiples
3:57 A Big IF …
4:29 IDFA changes!
6:25 Another issue!
8:45 More questions
9:31 IG vs TikTok?
10:29 Zuckerberg’s ambitions?
11:29 Burning cash?
12:44 My take
14:02 Another positive

DISCLAIMER:
The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.

Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.

In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.

I hope you enjoyed the content!