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Is META, aka Facebook, a value play after the last earnings miss? We’ll use our 8 Pillars, Stock Analyzer Tool, and chart reading strategies to find out.
#metastock #valueinvesting
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Meta is having quite the year it hit a high of 380 or so a share, and it got as low as 155 or 160.. It started to get my attention as it fell. Why?
Because i like stocks default a great place to start to look for value. Is stocks that have fallen to 52 52-week lows? Does that mean it’s a
guaranteed value? Absolutely not your job as an investor is to make sure that you understand the difference between price and value. We want to see a
disconnect between people’s perception of the company versus the stock price
So let’s pull up meta in our stock software, so i’m going to type in meta here on the main page, meta platforms. All right, the stock is currently at
163 dollars per share down 2.75 but, as i said, it’s a high of 384 and a low of 154.. So let’s go through the eight pillars: real quick on our
software. This is an eight pillar, thriller
I look at the first and the last. What are they? The five year p e ratio we want under 22.5 and the five year price of free cash flow. We want under
18., Oh sorry under 22.5 and it’s 18.. So this is good
Does it mean to buy? No, it does not. We look at all the other attributes. They bought back a few shares. Now i will say this
So that means these ratios here. Instead of being 18 were around 36 to 40 and instead of being 17 35 to 40, that’s pretty expensive to be buying back
shares when they’re buying back shares at expensive prices. They’Re investing your money as an investor into an expensive company. Yes, it’s their
own, but it’s no different than investing in another company, so we want to make that take that into consideration
They can pay off all their long-term liabilities with 0.9, basically 11 months of their free cash flow. That is incredible. They have cash flow
growth, they had revenue growth and they have rate income growth all over the last five years and they have a high return on invested capital. This
means they get a high return on the money that’s invested in the business
Going forward with a company to make sure that they can get good returns for their investors as cash is coming into the business okay. So let’s look
at a couple aspects of the company because they have slowed down and what’s the reason why they fell from 384 to 160.. Well, a big part of it is
quantitative. The user growth has slowed guys
They have three and a half billion worldwide users on instagram, whatsapp, facebook, augments all their platforms, three and a half billion of the
7.5 or 8 billion people on this planet. Just think about how many people? Don’T even have access to a computer and facebook is touching so many
people, so it’s natural that their user growth is going to slow. My thesis on facebook is or meta they haven’t maximized the revenue per user and
they’re investing a lot of money in the metaverse. This virtual reality, world of which we’re supposed to live in in the future
Investing in this. So if it doesn’t work out in five years, yes, they’ve lost 50 billion dollars, which sucks, but they also have 10 billion dollars
extra per year to give back to shareholders and that’s the key there. You have to sit there and say if this meta platform idea doesn’t work, are they
still going to be a good investment going forward? So that’s what we’re here to look at so some of the things i want to look at some more. This is the
income statement over the last 10 years
That’S incredible! Even last year they went from 105 to 120., Okay net income growth. Let’S go to the bottom here. Look at this 19 billion five years
ago, 500 million 10 years ago, and now 33 billion look at this 55 500 million dollars. They do this now in three or four days
Does that mean you gotten by no, it’s still possible to overpay for a lot of profit and it’s very possible over pay for growth? Let’S go look at the
growth numbers of last five years, so we have our stock analyzer tool if you’re new to this channel. I’M paul i’m a value investor. My goal is to buy
companies for less than the market perceives them to be worth. I use the quantitative aspects to screen out businesses and determine which ones i like
most and to invest in them and part of the quantitative part
To tell me what price to pay for the company today excluding their balance sheet? Is this a surefire sure why a way of investing absolutely not? But
it’s a great starting point, because the bigger the discount to my value, the more research i can do to determine if the stock is a good buy or not.
Now the question is what price we pay for facebook, slash meta. That is why we have the stock analyzer tool. This has been our most valuable tool in
our software because it allows us to make assumptions about the future and bring those assumptions to today to tell us what’s price, to pay
We give the one five and ten year as kind of a guideline, but as time goes on and the stock gets bigger and bigger and bigger, we have to adjust our
assumptions. My goal is to be conservative. Now, if you’re serious about investing you’re going to want to watch this part of the video over and over
again several times, because this is exactly how i want you thinking about being conservative about the future. There’Ll be people out there who look
at a 39 revenue growth of the last 10 years and say: okay, i’m going to assume 30 to be conservative
I’Ve done on meta, i’m going to use different numbers. I do now. I don’t use the exact same numbers, but i’m conservative in all of them. That’S the
key there if they’re around the same numbers
Like usual, i usually pick the 10 years of analysis and again you can pick anywhere from one to 20. And if you have our software, compare your
assumptions to my assumptions. I’M not saying i’m right, i’m not saying you’re wrong. However, i would say you’re wrong for assuming 30, you might end
up being right, but it’ll be a fluke and it’s not reasonable. So low middle and high revenue growth assumptions guys i’m going to go with 6, nine and
12.
Oh, my god, six. How is it so low? Well guys, remember apple changed how they’re allowing facebook to use their data. Facebook is gon na spend their
their big growth came in the last 10 years and they have to sit there and readjust how they grow their revenue. I think i’m being very conservative,
but i would not be surprised
That is where i’m standing there and that’s still almost doubling in the next 10 years. Profit margin now for profit margin. Look at the one five and
ten year numbers we have 28 percent last year, 32 in the last five and 31.7 in the last 10.. They are spending a lot of money on meta over 10 billion
dollars a year
I’M okay doing the high level where they were previously, but in the meantime, then below in middle. I want to be a little more conservative, free
cash flow margin. I’M actually going to mimic the exact same thing, because over long periods of time, free cash flow and profit and earnings should
be about the same thing. So i’m okay using the exact same numbers here now
The key here is: where do you think the p e and the price of free cash flow should be in 10 years, not today, 10 years from now, so the larger and
larger a company gets and the less growth potential it has the lower your pe should Be that’s a big reason why, on companies that have 30 or 40 pes
and a lot of growth potential i’ll go put it to 14 and like people like wait, what are you doing? I’M like guys it’s already if it grows the time in
the next 10 years, it doesn’t deserve the same pe and multiples as it does today. Okay, now here we see pe and price of free cash flows already being
pretty low, 13 and 12.. I do believe that the moat of facebook justifies a higher pe, so this i’m gon na do here. I’M actually gon na do 13, 15 and 17
for both of these pe and price of free cash flow multiples, because i do believe that as they get bigger and bigger and bigger and they engross more
of the world’s users, they can still have that moat to Justify the market wide pe plus, you want some sort of discount and finally for the desired
annual return um so guys i could actually understand doing a scale level here
I actually want a 15 return, because i think a few things have to work out for them in the meta, but there’s more risk for that. So that’s why i’m
putting a higher return level and the same thing for the high i’m gon na do 17 and a half percent here. So if you compare this video to my past meta
videos, i have not done that scaled up version. I actually like this at times when there really is a wide range of where the stock growth could be
That does not mean you go out and buy. It means you verify you do your research to verify. This is actually probable to happen any one of these and
it’s all red doesn’t mean you go out there and avoid it. If it’s pretty close, look at the stock right now, it’s down three percent
Okay, it’s not far off what you can do if you have. Our software is added to your watch list at 150 and the phone app email and software will notify
you when it hits 150. So it allows you to do more research and enter this community and start talking to people about what they think of meta. If you
don’t have our software yet go to everythingmoney.com it’s less than a cup of coffee per day, it is so easy to use
So we hit the analyze button scroll down. Oh boise, we got all three red – all three greens, sorry, 165 low 260’s, a high guys. Do your research, i’m
doing my research. I have puts at much lower prices on meta
I feel, like the story. Has been overly dramatic and i encourage you to do your research – don’t just buy because i’m looking at it. That is very
irresponsible, but i appreciate your time if you want to learn more about our eight pillar process. Watch this next video about the whole eight pillar
process and don’t forget to subscribe to our channel
Video
Source: https://www.youtube.com/watch?v=Rxaa6ru8dVw
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