Semicos, Google, Facebook, MSFT
In no other company would a CEO be allowed to essentially go rogue like this. All companies with dual-class shares will eventually trade at a discount, this is FB's time.
I don't even think the Metaverse is a bad idea, but applying the SV mentality of: we just need to lose more money than anyone else won't work, that isn't how the real world works unless you have someone even dumber to pay you off (i.e. stupider VC fund, IPO)...FB is top of the food chain, no-one else is coming in on this.
They either need to slow the cash burn (the numbers are just ludicrous) or spin the company (not possible).
This kind of thing happens and the discount can last literally decades. With dual-class share, there is no way to close it and most investors know this so they are just selling.
I will say it again: dual-share class isn't smart, the market isn't dumb, investors aren't stupid, it will go wrong eventually and everyone else is paying the price for Zuckerberg's own desire for self-aggrandizement.
To be clear though: he has created this situation. If he lost a reasonable amount of money, none of these questions would be asked. Anything north of $10bn is just madness, $5bn is bad, $2-3 is probably about right. It is all sustainable within the current situation, he just has no-one telling him how bad this all looks (what it looks like now is the opposite of the final scenario: man who is worth hundreds of billions rinses public shareholders for his fever dream VR fantasy).
Innovator's dilemma is all operational, so it should be separate from FB. Capital allocation choices are distinct from all this (the innovator's dilemma exists because CEOs are usually terrible investors/capital allocators, there are maybe 20 CEOs who have ever run a public company who can allocate capital well, Zuck actually had a decent rep before this because of his acquisitions but he is torching it with VR, which is clearly very far from commercial revenue).
This is how literally ALL the technology you use was developed. Huge, multi-decade spending on R&D until it works. Literally any technology you can think of.
I can't think of any technology that required multi-decade spending on this scale before revenue, fusion? If something needs multi-decade spending, it is either a scam or uninvestable.
I wonder if Meta would be going all-in on a VR system that nobody seems to want if Sheryl Sandberg were still around. She seemed like the only one who could say no to MZ. Granted, there are lots of other factors (TikTok, recession, Apple's privacy changes), but it is an interesting coincidence.
Actually, it happens all the time. The business press had been full of these sorts of characters for centuries.
Currently, even within the HN bubble, there's Mr. Musk, and several others.
What do you call a stock that's down 90%? A stock that was down 80% and cut in half again.
VR strategy fails, acquisitions stop due to regulatory issues, loses ad marketshare to Apple, TikTok continue to eat its lunch. As a result, stock gets even lower.
There you have it. Is this a very strong argument? Probably not, no, but it's a possibility.
VR is prob. the only thing that remotely looks promising for META now.
Vaguely remember when it was a big deal, but not why.
That's much harder for competitors to disrupt, especially when you give people tools to amass and customize content on their pages. E.g. wiki's, info, etc.
Inertia isn't a moat.
Source: I've re-spanned my social graph several times since Usenet.
It's fine. People aren't corporations.
Their revenue was $27.5B with COGS $5.7B vs. fixed costs of $16.3B. The cost of reality labs was $3.8B, let's assume for simplicity that it was all fixed costs. Plug those numbers into the formula, and it'd be a $2.5B loss. If their revenue was cut in half, they'd need to slim down massively in the non-RL segments to even break even, let alone be more profitable than now.
Is it though because the data doesn't suggest that.
It suggests that TikTok is dominating amongst younger audiences and that short form video content is a specific segment.
So while they are still insanely profitable for their core business the growth story is over.
If you think that $69 is a good price to pay for CSCO I’m happy to sell you as many stocks as you want.
The only way I see them recovering is regulatory action, either:
1. The White House bans tiktok, (hopefully, in FB's case) shifting TikTok's eyeballs to Instagram.
2. The White House forces Apple to undo informed tracking consent.
Personally, I believe Facebook was digging their own grave in 2010 and handled the privacy problem incredibly poorly. While consumers were unlikely to stop using Facebook, it left them wide open for Apple to kneecap them and now Zuckerberg's, likely correct, concerns that Apple doesn't really care about privacy falls completely on deaf ears.
Zuck needs to push his lobbying minions to make that the full-court press on Capitol Hill.
And that's exactly what happened...?
The president, orange or grey, is privy to information we are not.
Tiktok is a national security threat; orange-man-bad isn't a staple in any useful political discourse.
Neither of the things you mentioned have any impact on 90% of Facebook's users.
Everything was taken back to pre Covid levels. So if you can imagine we are back in 2019, whatever Facebooks price was, plus declining user base, and the Apple fuck you, it has room to drop.
Why do you believe it'll go back up from this price point instead of dropping another 50%+?
If you look at history, everything converges back to fundamentals in the long run; as many tech investors are starting to find out.
But to answer more directly, the current price is only good value if Facebook can grow its earnings over time. Right now they’re shrinking.
Companies with shrinking earnings tend to get single digit multiples
Do you know anyone who uses Facebook any more? How many Instagram users you know look at the ads?
Example: the share price of K-Mart was 134 dollars in 2007. Now it's 15 cents. And people were buying the dip all the way down. Think it will come back?
After all, no company lasts forever. Eventually they all go to zero and are replaced by some other company. That's why buying the dip just because it's a dip is a fool's game.
The question you should be asking is what are the company's earnings growth prospects going forwards, and how does that compare to the stock's current valuation.
the concept relies on an idea of aggregate information converging to an average best price in advance of the information being available to all. it relies on someone smarter than everyone else recreating all financial inputs to the company and having enough capital, risk profile and time horizons to exercise that opinion. When even that stretch of the imagination can be undermined by someone richer just wanting to get out.
Price people will buy/sell = function(their predictions of the companies future)