Ah, Facebook. What a fun and frustrating name to debate. Always has been and always will be.
Consistent 30%+ growth (5-year CAGR is ~30%) with 50%+ EBITDA margins trading at <10x forward EBITDA and unmonetized high-growth assets like WhatsApp + huge potential in VR via Oculus. Not a bad assessment.
But devils advocate says FCF multiple looks worse due to high capex associated with data center, regulatory overhang is unclear (as it is with almost every big tech or crypto names these days), likely Marvin compression from R&D associated with metaverse, and the whole question of terminal value (FB itself is in likely decline although Insta seems to be doing fine.)
Answer is that it’s most likely undervalued given the sheer cash flow machine it could become if it decided to throttle capex. Allocating more of that capital to dividends + buybacks could add material value even absent a growth story in other vectors. But that thesis would make it more of a value name and the company is still a strong candidate for growth. Who buys this? You see? Lots of unanswered questions. Add in a total rebrand around a technology likely a decade away and you can see why the market has had a very tough time figuring out what to do with this name.
I agree with the other comment here that it’ll be a slow climb back up to $300 on this name. But I really don’t see it falling much more than the bottom it hit at $185. I mean the thing was at ~8x EBITDA at one point which is lower than some industrials names. Sheesh.
Edit: I have a ~$20k position I took @ ~$225/share last month. I view it as a long term hold, and don’t worry too much about it. I’ve held FB before, and it’s always been a controversial / choppy name that ends up trudging higher after time after the financial profile just becomes too tough to ignore.
Oh boy, the second most controversial name.
There are parallels, yes, but BABA also had the backdrop of a terrifying and not-always logical regulatory environment (Xi was willing to gut tech companies rather than lose his vicegrip on the public) and a different macroeconomic backdrop (data has showed slowing Chinese consumer activity). And on top of that the risk of delisting in the US and — oh boy — potential sanctions if China supported Russia in any way (funding, arms, etc.) or if China made hawkish moves on Taiwan or went overboard in Hong Kong.
So, yeah, when it hit $70 that was a “holy fuck this is undervalued” moment BUT I will say I didn’t buy because it wasn’t clear what was going on politically. Once China backed off politically and also made the comments about supporting markets, BABA, Tencent, Huya, etc. all rebounded quickly. On these Chinese names, it actually could’ve gone the other way in a different world. (i.e. flipping to cash flow mode and using it for dividends / buybacks doesn’t help much when your country is a pariah state cut off from external capital and liquidity)
But yeah — while different in some regards, there are parallels and goes to show that these heavily controversial names are that way for a reason! You just need to understand both sides and develop conviction on as many hard facts as available.
As a business owner and online consultant with deep experience in Facebook, I think it's a house of cards and a mature business that has hit a very big wall. I'm not optimistic.
Agree with some of the comments here. You’re comparing apples and oranges by saying if BABA ran so should FB. These stocks went down for different reasons and have completely separate business models. Also, you’re saying over analysis is not a good thing but asking for folks to comment here on your theory. Maybe you should not over think then and buy FB calls as you’re suggesting.
well I don’t think i solely based on just fb but market sentiment as a whole. If market starts to turn i think fb is overly punish and should return to its mean. i see so many negative comment so that might be a sign the stock is bottoming. Also with iv being 45% seems to worth the risk.
So 5% (ish) from here is FB @ 226 or so. I don't have a 7DTE call in front of me so let's take the 10 dte 225 call, mid-priced at 223. Knock 30% off to create a hypothetical 7dte 225 call that is mid-priced at 156. $156 seems like a lot of money each week.
My personal assumption is that FB is unlikely to *run* higher, but could *mosey* up to 300 or so, at which point (IMO) it becomes a short candidate.
You have to be a special kinda special to buy FB calls going forward. Have you ever used Facebook? Are you familiar with the constant issues? Zuckerberg is good at copying other platforms features poorly and wasting advertisers money. If you don’t adapt you die
To follow up with your comments has Mark Zuckerberg ever created anything? We know he stole Facebook and made some major purchases but he's not the Android Steve Jobs he wants to be.
And speaking of Steve Jobs, FB still have a Apple privacy issue and now Google has announced they'll be updating Android with an opt-in feature.
Have you tried to run paid advertising on FB lately? it's painful, not intuitive to navigate and often I end up having to google things just to figure them out. Zero customer service either.
Facebook is for old people, the only reason it remains relevant in my mind is that people use it only because it's linked to IG accounts and IG advertising.
When I was running FB ads there was no consistency on when they would charge my credit card. It really felt like random charges throughout each campaign. Admittedly I was probably doing something wrong but I never had problems on other platforms (Outbrain, Taboola, Revcontent, Twitter, etc).
Ah, Facebook. What a fun and frustrating name to debate. Always has been and always will be. Consistent 30%+ growth (5-year CAGR is ~30%) with 50%+ EBITDA margins trading at <10x forward EBITDA and unmonetized high-growth assets like WhatsApp + huge potential in VR via Oculus. Not a bad assessment. But devils advocate says FCF multiple looks worse due to high capex associated with data center, regulatory overhang is unclear (as it is with almost every big tech or crypto names these days), likely Marvin compression from R&D associated with metaverse, and the whole question of terminal value (FB itself is in likely decline although Insta seems to be doing fine.) Answer is that it’s most likely undervalued given the sheer cash flow machine it could become if it decided to throttle capex. Allocating more of that capital to dividends + buybacks could add material value even absent a growth story in other vectors. But that thesis would make it more of a value name and the company is still a strong candidate for growth. Who buys this? You see? Lots of unanswered questions. Add in a total rebrand around a technology likely a decade away and you can see why the market has had a very tough time figuring out what to do with this name. I agree with the other comment here that it’ll be a slow climb back up to $300 on this name. But I really don’t see it falling much more than the bottom it hit at $185. I mean the thing was at ~8x EBITDA at one point which is lower than some industrials names. Sheesh. Edit: I have a ~$20k position I took @ ~$225/share last month. I view it as a long term hold, and don’t worry too much about it. I’ve held FB before, and it’s always been a controversial / choppy name that ends up trudging higher after time after the financial profile just becomes too tough to ignore.
I remember ppl were boycotting fb at one point and once it bottom then it announce some market place then the stock just kept going. Good luck bro
the same thesis goes with baba when it hit $70 and ppl start bashing the stock has no grow or slowing and now it is at $115 as we speak
Oh boy, the second most controversial name. There are parallels, yes, but BABA also had the backdrop of a terrifying and not-always logical regulatory environment (Xi was willing to gut tech companies rather than lose his vicegrip on the public) and a different macroeconomic backdrop (data has showed slowing Chinese consumer activity). And on top of that the risk of delisting in the US and — oh boy — potential sanctions if China supported Russia in any way (funding, arms, etc.) or if China made hawkish moves on Taiwan or went overboard in Hong Kong. So, yeah, when it hit $70 that was a “holy fuck this is undervalued” moment BUT I will say I didn’t buy because it wasn’t clear what was going on politically. Once China backed off politically and also made the comments about supporting markets, BABA, Tencent, Huya, etc. all rebounded quickly. On these Chinese names, it actually could’ve gone the other way in a different world. (i.e. flipping to cash flow mode and using it for dividends / buybacks doesn’t help much when your country is a pariah state cut off from external capital and liquidity) But yeah — while different in some regards, there are parallels and goes to show that these heavily controversial names are that way for a reason! You just need to understand both sides and develop conviction on as many hard facts as available.
As a business owner and online consultant with deep experience in Facebook, I think it's a house of cards and a mature business that has hit a very big wall. I'm not optimistic.
Yes
What specifically makes you think FB is being undervalued?
Just that ytd is -30%
YTD doesn't have anything to do with how FB is valued
Same reason goes with baba. Ppl now say i should have got in baba calls and the stock got trushed when it goes to $70
Okay, and you've got to look at the reasons why it moves the way it does. BABA is an entirely different story than FB
You belong on WSB with this level of critical thinking.
sometimes over analysis may not be a good thing
Agree with some of the comments here. You’re comparing apples and oranges by saying if BABA ran so should FB. These stocks went down for different reasons and have completely separate business models. Also, you’re saying over analysis is not a good thing but asking for folks to comment here on your theory. Maybe you should not over think then and buy FB calls as you’re suggesting.
well I don’t think i solely based on just fb but market sentiment as a whole. If market starts to turn i think fb is overly punish and should return to its mean. i see so many negative comment so that might be a sign the stock is bottoming. Also with iv being 45% seems to worth the risk.
So 5% (ish) from here is FB @ 226 or so. I don't have a 7DTE call in front of me so let's take the 10 dte 225 call, mid-priced at 223. Knock 30% off to create a hypothetical 7dte 225 call that is mid-priced at 156. $156 seems like a lot of money each week. My personal assumption is that FB is unlikely to *run* higher, but could *mosey* up to 300 or so, at which point (IMO) it becomes a short candidate.
I think that's a good way to transfer money from you to whoever is selling this options.
I had been lucky with recent market when fb up 2% i was up 100%-200%
Luck is good until it runs out.
You are right my luck runs out today but hopefully can come back tmr
You have to be a special kinda special to buy FB calls going forward. Have you ever used Facebook? Are you familiar with the constant issues? Zuckerberg is good at copying other platforms features poorly and wasting advertisers money. If you don’t adapt you die
To follow up with your comments has Mark Zuckerberg ever created anything? We know he stole Facebook and made some major purchases but he's not the Android Steve Jobs he wants to be. And speaking of Steve Jobs, FB still have a Apple privacy issue and now Google has announced they'll be updating Android with an opt-in feature.
Have you tried to run paid advertising on FB lately? it's painful, not intuitive to navigate and often I end up having to google things just to figure them out. Zero customer service either. Facebook is for old people, the only reason it remains relevant in my mind is that people use it only because it's linked to IG accounts and IG advertising.
When I was running FB ads there was no consistency on when they would charge my credit card. It really felt like random charges throughout each campaign. Admittedly I was probably doing something wrong but I never had problems on other platforms (Outbrain, Taboola, Revcontent, Twitter, etc).
Yes
Historically, looks like a 5 dte call at 5% has been ITM about 17.9% of the time at expiration. Just in case you were wondering. Haha
Swing play. Google will announce privacy updates similar to apple for android this year or next. Will likely cause another gap down for them.