I am typically averse to high-growth, low-income, high-valuation tech stocks. It's just not the corner of the market I normally play in, which I realize probably puts me in the minority here.
However, a PE of 13 is reasonable by almost any standard, and I think the view that FB's top line has peaked are probably off a bit. They saw 38% yoy revenue growth last year, and they made $47B in operating income. $47B!
I realize they have some things working against them:
- They are beholden to privacy settings that are determined by other companies. Their MAU hasn't been increasing. But MAU growth matters more for the high-growth, low-income, high-valuation tech stocks. Facebook isn't that anymore. They are a cash cow that has a proven advertising model and damn near half the global population as its user base.
- Rates are rising. Yes, but they make money right now. The income needed to value them doesn't exist down the road. It exists right now and in the near future.
- The metaverse is a risk. Sure. I'm 37 and hope I never have to get into (onto? within? under?) the metaverse. But Facebook makes money without it, and it isn't clear to me why the metaverse should be a big part of this bet.
It sounds weird to describe Facebook as a value play, but at what point are they exactly that? 10x earnings? There are not that many companies that make $40B annually, and even fewer of them are growing their bottom line by 30% yoy (and top line by a similar figure). Their market cap is around $500B, and it's hard for me to think that we are too far away from a fair value for the company.
I don't currently have a position, but as it keeps dropping, it's hard for me to justify staying on the sidelines.
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