Analysis of $META
$META, formally known as Facebook, is a story emboldened by humanity’s warped perceptions. $META took social media to whole new heights, but has it been to the benefit of society? One could look at the information parity that social media brings as a great equalizer and human benefit, or one could look at the obsessive-compulsive disorders that are borne from our social media addictions as a drawback – either way we have to live with this duality. $META want to take this even further with ambitions of creating a Metaverse – a morphing external reality mirroring our own, and maintained by us. Today on “The Other Side with Sihle Sibeko”, we examine the investment thesis for $META using quantitative data, qualitative data and African Spiritual Sciences (“AS”) principles.
QUANTITATIVE
$META’s numbers are simply insane. The company is undervalued by many market reporters – so undervalued that few even persist that one must shy away from investing in $META over the medium term. However, to astute and contrarian investors with longer-term horizons, $META could be a nifty portfolio entry. $META’s one-year performance and year-to-date performance stand at -58.52% and -53.17% respectively – plummeting the company’s market cap from $985.92bn in Q2 of 2021 to $428.83bn in Q3 of 2022, but this does not represent the operational performance. In the last post, I noted that market capitalization is perception-based rather than intrinsic. $META’s revenue compounded annual growth rate ("CAGR") since 2018 is an impressive 24.84%, operating income is 25.19% and earnings is 25.27%. Earnings per share ("EPS") since 2018 has grown by 16.19% from $6.43 to $12.04 (albeit declining from an all-time high of $13.99 during that period, which would push EPS CAGR to 22.84%). All this seems impressive, until you factor in the Free-Cash Flow ("FCF") and Return on Invested Capital ("ROIC"): an incredible 22% FCF growth since 2018, and an even more impressive 33% FCF-to-Earnings margin (how much free-cash is generated in relation to earnings profit) alongside ROIC of a staggering 27% for $META’s latest financial year end. Ridiculous operational performance by all accounts, a free-cash generating juggernaut, and an ROIC beast… so why is the company much maligned according to analysts?
QUALITATIVE
$META’s growth from dorm-room brain-tease to global behemoth is nothing short of meteoric. Since 2003 the company has revolutionised advertising and e-marketing. Whereas $GOOGL’s (Alphabet) strategy was to pair businesses to interested buyers, $META’s strategy was to develop marketplaces for businesses to advertise to a host active buyers without defined interests. This in turn created a closed network effect that allowed $META to maintain gross and operating margins of 80% and 40% respectively – indicative of the company’s stable, but waning, pricing power in data and advertising. The negative investor sentiment may stem from competitor’s testing $META’s resolve - $AAPL’s Identifier for Advertisers (“IDFA”) & $GOOGL’s GoogleAds both offer users an ability to track advertiser conversions, forcing $META to reduce their advertising pricing by 12% - 18% across its tiers. Alongside this, another competitor is intruding their turf - TikTok is the new social media sensation that is capturing Generation Z, a market that fell from 71% user-concentration in 2015 to 32% in 2021 across $META’s platforms. $META’s gone so far as mimicking TikTok’s reel-style storyboards. $META’s qualitative malaise is also belaboured by the Cambridge Analytica scandal, AND RealityLabs accounting for $683m in Group revenue but $2.2bn in losses, AND the “$META will never surpass $28bn a quarter” narrative, AND negative perceptions on the Metaverse. Of all these, the Metaverse may be the one most underappreciated by investors, but most key to $META’s performancel in the coming years. Using, AS, we’ll assess the Metaverse and why it presents us with a compelling value proposition!
AFRICAN SPIRITUAL SCIENCES
Before getting embroiled in opinions and conspiracies, let us breakdown what is the Metaverse – a simulated reality where users engaged through virtual reality (“VR”) & augmented reality (“AR”) gear create a personalized avatar who mirrors the lifestyles and wants of the said user. Simple really.
But doesn’t this sound all too familiar? Social Media exploits are incredible because of the projections of persona vs reality. The individual behind the Social Media account is often disassociated from the avatar / individual presented on the social media account. Their views, commentary, stories, reels, aptitudes are often incongruous to the persons ACTUAL views, commentary etc. The sensation and frenzy often absolve people of affinity to their virtual self; present a person with a list of their tweets / posts / reels, and they may suggest that it was under the guise of a troll account, lacking in awareness to take responsibility for the vile they spew because in their mind – it’s the TROLL spewing the vile, not them. It is in this disassociation that we find the link to AS.
AS principles state that Blackness is the immutable Infinite source which houses all potential and non-potential. Everything emerges out of this Blackness – Light is the first sign of life as it creates duality / distinction (time and space aka spacetime). From spacetime, life evolves from a pico-unit and quark state to a material state (matter & anti-matter), and ultimately to a cosmic, then planetary, then life-form state; these states exists across 12 dimensions (ours being the third) All these states of evolution have a resonance and in effect, are alive. From the pico-unit and quark state all the way to the latest new-born (life-form state) – everything is imbued with Blackness, which, allows the Infinite Source an opportunity to exist in an infinite array of states. Translated to Humans, we can view life as Infinite Source projecting itself onto a canvas, one that we describe as “reality”, whereby we humans are ITS avatars - disassociated and aloof from the ultimate reality of our relationship with the Infinite Source and the countless realities that exist beyond our dimension; and yes – we are connected to these realties and dimensions. There exists another version of you that is present in the dimension of your Ancestors, as an example, that is living / projecting itself through you (the avatar) as you read this post.
Blackness projecting itself through Light onto a canvas of its own creation mirrors exactly what $META intends with the Metaverse – to project a virtual reality onto a Black screen (VR gear, phone, tablet etc). Metaverse represents a market opportunity that intuitively gnaws at the very essence of what it means to be human, alive and distinguishable – it allows one to be aloof of their own reality in search of creating new, more involved experiences, and we are subconsciously always attracted / yearning to search for more creativity. This is why life emerged out of Blackness, this is why existence exists, and this is why, alongside a great quantitative backdrop and overstated qualitative backdrop, I believe $META represents at its current levels a fantastic investment opportunity for investors with a long-term disposition.
Siyabonga!!!
This week's affirmation: I align all dimensions of my being to love, bliss and abundance!
This week's vibe: https://www.youtube.com/watch?v=guwfTFFaLLc / https://open.spotify.com/track/1O1qPvS595hMv3WxXprDlx / https://music.apple.com/us/album/nandis-suite-1st-mov-feat-mbuso-khoza-linda-sikhakhane/1522605049?i=1522605050 - Nandi's Suite (1st Mov) by Ndabo Zulu and Umgidi Ensemble
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