Facebook Is Now Meta Platforms
We think the shares are attractive.
On Oct. 28, Facebook FB changed its name to Meta Platforms, as it will focus more on investing in innovation for the long run, mainly in augmented and virtual reality. Meta will consist of two business segments: family of apps, which includes Facebook, Instagram, WhatsApp, and Messenger, and reality labs, which drive the firm’s long-term metaverse strategy with augmented and virtual reality hardware and software. Beginning on Dec. 1, Meta’s stock will begin trading under the ticker MVRS.
We have not changed our view on Meta and continue to rate it a wide-moat firm with a solid network effect and intangible assets as economic moat sources. As users on Facebook and Instagram continue to grow, admittedly at decelerating rates, we expect advertisers will keep coming. The firm last reported that 3.58 billion people access at least one of its apps per month, generating first-party data to improve ad effectiveness, offsetting challenges like Apple’s iOS changes. We also expect e-commerce to drive further top-line growth. Our fair value estimate remains $404, which represents an attractive 27% upside from the stock’s current price.
While the firm’s current augmented and virtual reality offerings generate some revenue, we estimate that they represent less than 5% of total revenue. However, we think monetization opportunities will come from both sales of additional virtual reality hardware and revenue sharing with merchants and content creators selling digital or physical products. For metaverse to take hold and attract billions of users, the virtual world needs to be more interoperable, like the physical world where users can easily experience many different environments and interact with different individuals and groups. Given Meta’s network effect moat source, Horizon (its metaverse project) should be a step ahead of competitors in attracting users and quickly building virtual environments, which should attract more users, content creators, businesses, and advertisers.
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