Thread by @SleepwellCap

My views on $FB and why I’m not invested:

Is it “cheap”? Yes, by many measures. It’s an incredible business, one of the best in the world.

But I disagree with most adjustments people make (cash, core/ex blah earnings, WA, growth capex)

I don’t value it that way. Why?

1/n 🧵

As a shareholder you either want cash flows back quickly and in size, or be very patient and get a big payday down the line in return.

Even though you can slice the numbers to make $FB look really cheap, you’re not seeing many of those earnings returned to you

Let’s take a look

It trades at a ~3% (30x) ‘22 FCF yield — cash flow, minus guided capex, adj for SBC; which is roughly equal to buyback minus SBC. Call it ~$30b (75-31-12)

As a shareholder that’s the only cash you’re seeing TODAY. You can’t buy it for that reason, you have to expect a big payday

$FB is doubling down here.

It’s undergoing a massive investment period (metaverse bet) by overspending in opex and capex (capex announcement was insane) and taking margins deliberately down

I admire that, but it’s very uncertain. I have no idea what the metaverse will bring.

So you have to trust the vision and understand the strategy intimately well, to be comfortable.

It really comes down to making a jockey bet on Zuck’s vision and ability to deploy cash flows efficiently and at attractive rates.

I’m not there yet.

Don’t get me wrong, he’s got a great track record and (some) chance of achieving it. I also think it will be tough to show true profitability without screaming for regulation

I 100% root for him & the longs and wish them well, but do so from the sidelines

Too hard pile for me.