1-Star Price
INVESTOR
5-Star Price
INVESTOR
Economic Moat
INVESTOR
Capital Allocation
INVESTOR
Meta reported mixed third-quarter results and its guidance for significant operating expense growth in 2023 was disappointing. We have also lowered our top line projections, which will likely further increase margin pressure next year. Our fair value estimate now stands at $260, down from $346. With uncertainty in the near term, we recommend patience with this wide-moat firm.
Meta is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Meta refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Meta operates at a 30%-plus margin.
