Meta Platforms Inc (NASDAQ:META) slumped 24.5% last week on the heels of its earnings report as investors digested the miss, and weak fourth-quarter outlook.
Shares of the once-trillion-dollar tech juggernaut have returned to levels seen in 2016 — around the $91.00-$95.00 level — prompting some investors to wonder if the stock is investible at these prices.
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According to Ironhold Capital founder and chief investment officer Siddharth Singhai, Meta is a buy, and here’s why.
“The fundamentals are great, and the underlying business does well — the stock price will take care of itself in the long run,” Singhai told Money Mitch on Benzinga’s "Stock Market Movers" on Wednesday.
“The fundamental problems [for Meta], in my view, are nonexistent. If you examine the fundamentals, the company [is doing] better than it was last year; the only thing that has changed is advertising demand has fallen off, but the same has happened for Google as well. That’s just general slowdown in the economy.”
It’s true, declining ad revenue and higher costs put pressure on Meta's sales, margins, profits, and share price.
Still, Meta has around 3 billion monthly active users and roughly 2 billion Daily Active Users (DAUs) — both of which increased on a YoY basis as MAUs grew by 2%, and DAUs increased by 3% YoY.
Many investors were concerned with the rate of spending that Meta is dumping on its metaverse — $15 billion to date, and a pledge of an additional $100 billion. Money Mitch asked Singhai if he was concerned about that rate of spending.
“We have to understand that it’s not just metaverse,” the CIO said, “[Meta] is also spending a lot on data centers, which allows them to then pivot to other things as well. Right now, it’s not clear how [Meta] will build the future of artificial intelligence — what Mark Zuckerberg has done by investing in Data center capability, and AI capability is that he’s future-proofing Meta.”
While the Meta bull case is strong for some — the sentiment is lost on others.
According to Ken Mahoney, President of Mahoney Asset Management, Meta is a short.
“The business model changed overnight,” Mahoney plainly said to Money Mitch. “[Meta] used to rifle [consumer] information, sell it to third parties (not knowing where it's going) then Apple Inc (NASDAQ:AAPL) put a pretty big clamp on it; a $10 billion per quarter clamp.”
The clamp is called App Tracking Transparency, or ATT for short.
Apple first introduced the ATT feature in iOS 14.5, which was released for iPhones last year. It’s also included in iOS 15, which is running on 72% of modern iPhones, according to Apple.
ATT consists of popups that ask users whether they want to be tracked when opening an app. If the user says no, the app developer can no longer access the IDFA, a device ID that’s used to target and measure the effectiveness of online ads.
Meta admitted earlier this year that the privacy change Apple made to its iOS operating system would create a $10 billion headwind for 2022.
“What did Meta do?” Mahoney asserted, “they renamed themselves to Meta. That business model (while it produces income) spent $15 billion into metaverse – and it's a niche product, it's for gamers.”
Mahoney continued, “Zuckerberg, to me, is an awful steward of [investor’s] money. Year to date, he’s lost $100 billion of his own net worth — I think there’s more pain to come. There’s no hope for Meta at the moment, unless they change their business strategy, change-out Zuckerberg would be my thought for a catalyst to go long on the stock — until those things happen, Meta is a short into rallies.”
Disclaimer: Ironhold Capital currently holds an open position in Meta Platforms, while Mahoney Asset Management has an open short position on Meta Platforms.
Price action: Shares of Meta were down 4.89% to $90.54 on Wednesday. The stock has a 52-week high of $353.83, and a 52-week low of $92.45.
Photo: Courtesy of shutterstock.com
