1/
$FB FY21 free cash flow is $39.1 billion. Which is likely to decrease ~30% after a significant increase in capex for FY22.
The market has more than priced this in over the past 3-4 months with the share price down 38% YTD.
$FB FY21 free cash flow is $39.1 billion. Which is likely to decrease ~30% after a significant increase in capex for FY22.
The market has more than priced this in over the past 3-4 months with the share price down 38% YTD.
2/
More importantly though is what $FB FCF looks like 3-5years from now.
@theTIKR estimates have FY26 FCF for Meta at $72 billion, which is a 13.1% CAGR, including a 31% decrease in FY22.
More importantly though is what $FB FCF looks like 3-5years from now.
@theTIKR estimates have FY26 FCF for Meta at $72 billion, which is a 13.1% CAGR, including a 31% decrease in FY22.
3/
$FB current EV/FCF multiple is 13.6x which is arguably cheap on a relative and absolute basis.
Meta is valued at ~7.5x FY26 FCF if the estimates above are accurate.
$FB current EV/FCF multiple is 13.6x which is arguably cheap on a relative and absolute basis.
Meta is valued at ~7.5x FY26 FCF if the estimates above are accurate.
4/
The appeal to me is what $FB will do with that FCF.
As of Q4 FY21, Meta has ~$38 billion available and authorised for repurchases.
I would hope and assume those buybacks are happening now while the price is depressed.
The appeal to me is what $FB will do with that FCF.
As of Q4 FY21, Meta has ~$38 billion available and authorised for repurchases.
I would hope and assume those buybacks are happening now while the price is depressed.
5/
Zuck spent $50 billion on buybacks last year at a significantly higher valuation, so I’d be somewhat concerned if buybacks aren’t taking place right now.
Moving forward $FB could comfortably buyback $30-50 billion of shares every year (5-9% of current market cap).
Zuck spent $50 billion on buybacks last year at a significantly higher valuation, so I’d be somewhat concerned if buybacks aren’t taking place right now.
Moving forward $FB could comfortably buyback $30-50 billion of shares every year (5-9% of current market cap).
6/
Over the next 5yrs $FB annual return could consist of:
13% FCF growth + 2-5% buyback yield (or dividend) + 0-10% multiple expansion = 15-25% annual return.
Over the next 5yrs $FB annual return could consist of:
13% FCF growth + 2-5% buyback yield (or dividend) + 0-10% multiple expansion = 15-25% annual return.
7/
The most unpredictable of course is the multiple expansion.
To get a reasonable multiple re-rate I’d assume we need to see Reality Labs become profitable and continue a high CAGR over the next 5 years.
The most unpredictable of course is the multiple expansion.
To get a reasonable multiple re-rate I’d assume we need to see Reality Labs become profitable and continue a high CAGR over the next 5 years.
8/
I’ll discuss this more in my free newsletter deep dive on $FB
which is out in two weeks time.
Subscribe for free at: seekingvalue.substack.com
I’ll discuss this more in my free newsletter deep dive on $FB
which is out in two weeks time.
Subscribe for free at: seekingvalue.substack.com
9/
To access TIKR for 15 years of financial data on over 60,000 companies + estimates, news, watch-lists and a stock screener.
Use the link below:
Tikr.com/Frank
To access TIKR for 15 years of financial data on over 60,000 companies + estimates, news, watch-lists and a stock screener.
Use the link below:
Tikr.com/Frank
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