Thread by @convequity

1/ Meta ($FB) has been out of favour for the past 5 months. Prospects of the Metaverse hasn’t interested investors enough to overcome the media negativity relating to algos, whistleblowers, & Apple’s privacy policies.

This thread shares some thoughts about Meta & the metaverse.

2/ During the month prior to Facebook Connect on 28th Oct & subsequent Nov rally, the core enabler of m'verse remained flat whilst key players were hyped.

Jan market meltdown leveled things but we see the Oct/Nov action reveals the underappreciation of Meta’s role/potential.

3/ The subdued stock response to Zuckerberg’s metaverse vision was in large part due to ongoing controversy connected to its algorithms, negative sentiment re Apple privacy moves, & the name change appearing as an attempt to mislead the public & deflect criticism.

4/ Also the unenthused response was likely partly attributable to Zuckerberg’s Facebook Connect speech which was more about laying out a far-fetched roadmap rather than a demo of a suite of new products.

The following tweets are some thoughts about Meta & the metaverse.

5/ Quest 2 is widely regarded as #1 VR headset. A standalone (not requiring PC/mobile or ext. sensors), immediately playable, affordable, has shipped 10+ million units, most downloaded app, hitting early stage mainstream adoption, big ramp in dev interest, lots of native apps.

6/ Project Cambria (possibly named Quest Pro) speculated to be launched in 2022 takes things even further.

Key feature >> eye-tracking that has been long-wanted by developers as another input to advance the VR experience.

7/ Carmack’s eng. vision for AR/VR.

He's 1-of-a-kind >> pioneered 3D graphics >> still highly visionary >> he aims to develop spatial audio so peeps having convos can be heard at a volume commensurate to their distance & making VR audio indistinguishable from co-present chat.

8/ In recent talks Carmack seems as sharp as ever and appears obsessed with getting all the nuances right in order to get better at matching reality. He really is key to Meta's success in the metaverse.

9/ CTRL-Labs >>> acquired by Meta in 2019 >>> CTRL-Labs created a neurological device and software that that can control tech with muscular impulses & also map these impulses back to neurons. This enables one to control a piece of tech by merely thinking what they want to do.

10/ If Meta can successfully integrate CTRL-Labs & use this tech for Oculus, they’ll extend their VR lead by a considerable margin. Furthermore, it would allow them to further innovate into the brain-machine interface tech, that would be another multi-trillion-dollar opportunity

11/ Will the Metaverse succeed?

As we’ve moved thru Web 1.0, thru 2.0, & now 3.0, we’ve advanced from text >>> to photos >>> to video >>> & the next stage of the evolution, aka Web 3.0, logically feels to be something more immersive enabled by VR/AR and the metaverse.

12/ It just feels like the Metaverse is intertwined with too many powerful emerging themes >> failure is very unlikely.

13/ Will Meta ($FB) succeed in the Metaverse?

Well,

• they have the technical best VR + they’re a headset cost leader

• they have c. 10x more headsets in market vs comp

• Zuck’s long-term vision & Carmack’s ingenuity is a winning formula

Continued ...

14/
• w/ CTRL-Labs they could make great strides in matching reality even closer

• they have the Quest user + developer flywheel effects in full motion

• they have c. 3 billion social media users to tap into

15/ Why did the other key metaverse players rally in Oct-Nov?

- RBLX >> the killer app for the Oculus headset for kids

- NVDA >> the number one GPU chip to render metaverse graphics for cloud-based gaming

- QCOM >> the chip supplier of Oculus Quest series

Continued ...

16/
- AMD >> great appeal to game console vendors

- U >> shares a duopoly in the high-resolution gaming engine world

17/ As a result, we believe the market is recognizing the value proposition for the metaverse but downplaying the value of Meta’s role within the metaverse.

18/ This seems odd considering Meta has a real chance of capturing a good chunk of the value chain >> leveraging a hardware + software combo, perhaps similar to how $AAPL has achieved dominance in smartphones.

19/ It certainly feels that investors are overly concerned with Meta’s present issues without imagining the future. A prime example of short-termism.

20/ GS’ midpoint forecast for the metaverse market is $8tn (no timeline given), similar to MS. If $FB can capture 10% of this then they’ll double their current market cap on the metaverse alone.

21/ $FB EV/EBITDA is lower than other big tech but they probably have the major advantage in this huge greenfield market.

22/ Thanks for reading, we have more research on Meta & other tech stocks at convequity.substack.com and seekingalpha.com/checkout?servi… as well as the public SA site

A mistake here; meant to mention the market cap will be multiple times higher than the current market cap should $FB capture 10% of the estimated $8tn metaverse.