“At current prices around $110 per share, we think Meta Platforms is one of the best opportunities we have seen in our careers.”
With an opening line like that, how could we not include this article from Bireme Capital. Bireme believe that investors are missing the strong story in social media because of all the noise about TikTok. Metrics like “user time spent” and “ad impressions” are still growing. And while they haven’t figured out how to monetise Reels yet, it is keeping users on Instagram for longer.
They then turn to Reality Labs aka the Metaverse. The segment lost $5.8 billion in the first half of 2022 and the Wall Street Journal report Meta’s Horizon Worlds only has 200,000 users (down from 300,000 earlier in the year). Not promising.
But Bireme believe that there is potential growth in AR and VR, and that Meta will be in position to capitalise on it. They do note, they would prefer if Zuckerberg pursued these metaverse efforts through a different, separately-funded company rather than through Facebook.
And in that statement lies the problem. You can believe that Meta is looking cheap and that their social media businesses are cash generating machines with strong moats (and not too many investors would disagree). The challenge is that Zuckerberg controls the company. So if he believes in the metaverse, Facebook and Instagrams cashflows will go in that direction. Even if Zuckerberg is the last believer in the metaverse.
That is both the potential and the risk in founder-controlled businesses. Their single minded determination can often build billion dollar businesses. But that same single minded determination can also build white elephants and destroy billions of dollars of wealth. The thesis for Meta today has to start and end with Zuckerberg.
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