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.
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-MAU 381mm (+19% y/y, high end of guide)
-Premium 172mm (+19% y/y, midpoint of guide)
-Rev +26% (fx adj)
-Ad-Supported revs up 75% (13% of revs)
-Gross margin 26.7% (up 200bps y/y,above guide)
-ARPU up y/y from price increases
-FCF of 99mm EUR
More details to follow.
This is a good print. Let’s dive in.
MAUs DD growth across all regions, back to trend (after 2Q of misses)
Strength in RoW, specifically India, Philippines, Indonesia. Also called South Korea, Bangladesh, Pakistan.
Just in case These are huge population countries.
Premium subs growth strong and in-line with trend. Helped by various partnerships with telcos, hardware providers and financial institutions.
Churn down q/q and up y/y (historic low, tough comp). Still expects churn to be down for the full year
$FB revenues up a cool 35% y/y
Total expenses up 39%
EBIT 36% vs 37% y/y
New reporting segments
FoA: Family of Apps (fb/ig/wa)
FRL: Facebook Reality Labs (ar/vr software, hardware, content)
Getting serious about the Metaverse.
Let’s try to put all these tech buybacks in context by netting out SBC please.
$FB
$50B buyback announced
$10B SBC
$40B adjusted buyback (~4% of s/o)
How is it that $FB plans to spend $30+B in Capex in 2022 from a ~$140B revenue base when $GOOG spent $22B last year on $183B of revenues? I’d think FB was lower given they’re not a hyperscale cloud provider
A few highlights from a Global Music Report by @MusicAlly
Mexico:
-Over 60% of all Mexican label revenue came directly from Spotify
-The World’s streaming mecca, according to Spotify
-20mm people use a streaming service, while 80mm people own a smartphone (& quickly growing)
Brazil:
Amazon Music passed Deezer to become the second DSP in number of subscribers, behind Spotify, which
has 61% of total subscribers and contributed 45% of all Brazilian recorded music revenues in 2019.
Don’t have a very big Apple hardware user base in the country
Brazil (cont.)
Paid streaming accounted for almost three quarters of recorded music revenues in the region
Overall, Brazilians became more aware of the benefits of music streaming services, and started adopting and using it more.