Back in November 2022, I wrote my analysis and valuation of Meta:
https://www.reddit.com/r/stocks/comments/ynuo2k/meta_stock_analysis_and_valuation_is_michael/
It was written, by coincidence, on the day when the share price hit the lowest point before recovering.
This post serves to archive my thoughts on my investment decisions:
Why I bought Meta:
When I looked at the company, I saw Meta as a speculative bet. Although the family of apps (Instagram/Facebook/WhatsApp) are cash-generating machines, putting tens of billions into the Metaverse brought a lot of uncertainty. There wasn't (and still isn't) a lot of info to make an educated guess on how much that segment is or will be worth. So in my valuation, I focused on what I knew.
Based on my analysis, the market was applying roughly a $100b discount due to the Metaverse, compared to a scenario where no investments into that were made.
Mark Zuckerberg has roughly 60% of the voting rights due to the dual-class shares. This means he has significant influence over the decisions being made. Therefore, if he wants to be the first to create something, he can move towards that, regardless if that's the best outcome for the shareholders.
This brought the share price down from the high of $350+ (which I believe was overvalued) to below $100, representing a decrease of 75%. The market was expecting Zuckerberg to be stubborn and continue executing his vision.
Personally, I am interested in increasing my knowledge over time, and as mentioned in the initial post, I decided to open a position to be entertained by what is coming next.
Why I sold Meta:
After the collapse of the share price, the management of Meta did a lot of changes. The metaverse wasn't the main focus, the # of employees was reduced and the focus went to improving operating efficiency.
The market liked this, a lot, and since, the share price is up 160%+
Now, with the share price being close to $240 and a market cap of $614b, based on my analysis, Meta is overvalued, again. I don't see a significant upside, hence, I did close my position.
My main takeaway from all of this is, despite the voting rights being in the hands of one individual when there's a lot of pressure from the outside world, it is difficult to go against everyone. Especially after the share price decreases by 75%.
I am sure that there will be future cases when the management will go with their heads against the wall, but Meta was not one of them.
[link] [comments] https://www.reddit.com/r/stocks/comments/135z2qg/why_i_bought_and_sold_meta/
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