Background
Market cap : 1.45 trillion
Revenue growth : 28% yoy
Forward PE : 17.5
Operating cash flow : 135 billion
Free cash flow : near none due to capex
Gross profit margin: 82%
Operating margin: 38.1%
Revenue breakdown:
Advertisement : 97.6% (28% growth qoq)
Whatsapp monetization : 1.29% (73% growth qoq)
Reality labs : 1.1% (17% growth qoq)
Moat
\- Stronger than ever before. Youths legal issues prevent any other competitors from entering the market. There simply cannot be any more future platform that can target young audiences with 2 hour use limit per day and without an AI technology to verify the age. It will require billions of dollars before ever starting a platform that would replace Instagram or Facebook.
\- Nearly half of the population on Earth is daily active users of Meta products.
Catalysts
\- Meta Compute will likely be released the second half of this year or beginning of next year.
\- Meta targets 14 GW by the end of 2027.
\- Meta recently hired Dave Brown who was part of and led the AWS Compute for 19 years.
\- Meta has multi-vendor GPU strategy with google TPU, Nvdia GPU, AMD GPU.. coupled with cost reduction with its own silicon Iris accelerators.
\- Meta acquires 10% of AMD entire market cap if AMD reaches $600 stock price.
\- Meta has a large group of AI scientists incentivized greatly with Meta stock price. These researchers and scientists are from OpenAi, Anthropic, Google Deepmind, Microsoft Azure. These talents do not have intention to leave as they are promised hundreds of millions of dollars if the stock price reaches above $1000.
\- Mark Zuckerberg's almost entire net wealth is tied to Meta stock price.
The stock is cheap. And its revenue is going up fast.
The biggest catalyst is the upcoming compute capacity coming online for Meta and Meta compute. Revenue will be diversified and the revenue with high margin will add tens of billions of dollars for Meta.
Strong buy. With expectation that pe ratio of 25 will be obtained (5 year average).
Target price : $850
Legal issues or any other issues can be handled with $135 billion dollar operating cash flow.
UNH was $230 last year and now $400. Such a bad sentiment. But if UNH a company that rejects insurance claims can double from its low. Surely Meta can as well.
This is a stock I called triple whammy
1. Low valuation to start
2. Legal issue overhangs dies away
3. Meta Compute adding tens of billions of dollars to operating cash flow.
Target price again $850 or even beyond that and eventually stock split then sell.