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Can someone make an argument against buying at this price point? It was what, 378 a year ago? It’s even cheaper than the crash in 2020.

senko 4y ago
Yes. VR strategy fails, acquisitions stop due to regulatory issues, loses ad marketshare to Apple, TikTok continue to eat its lunch. As a result, stock gets even lower. There you have it. Is this a very strong argument? Probably not, no, but it's a possibility.
- ethbr0 4y ago
  + Recession causes Facebook's primary ad customers to slash advertising spending to save money.
  - colinmhayes 4y ago
    Facebook's revenue could cut in half and they could easily make more profit than they did this quarter just by getting rid of reality labs. The only thing holding the stock back at this point is Mark and I guess the fear that no one will use facebook 20 years from now.
    - hustwindmaple1 4y ago
      Getting rid of reality labs, then what? Be a sitting duck and getting attacked by Tiktok/Apple left and right? They have basically no moat now. VR is prob. the only thing that remotely looks promising for META now.
      - colinmhayes 4y ago
        Facebook still has 3 billion daily users. For all the doom and gloom it’s doing fine. Yes it’ll probably slowly fade into history but that will take decades.
        samatman 4y ago
        By the end of the decade people will feel about Facebook the way they feel about Game of Thrones. Vaguely remember when it was a big deal, but not why.
        ethbr0 4y ago
        This undervalues Facebook's social network moat, which is honestly what they should be leaning into: a more interactive Yellow Pages / local groups directory. That's much harder for competitors to disrupt, especially when you give people tools to amass and customize content on their pages. E.g. wiki's, info, etc.
        samatman 4y ago
        There's no moat. Inertia isn't a moat. Source: I've re-spanned my social graph several times since Usenet. It's fine. People aren't corporations.
        kevinventullo 4y ago
        That doesn’t make for a compelling buy signal. In principle, you should buy a stock because you believe you will be repaid in dividends over time. If the ship is sinking, even slowly, those dividends are not terribly appealing.
      - badpun 4y ago
        By that logic, Google has even less of a moat? I mean, anyone with money can just make a decent search engine.
    - jsnell 4y ago
      How do you reckon that? Back of the envelope, their profit in your scenario should be about (revenue - COGS) / 2 - (fixed costs - fixed cost of reality labs) Their revenue was $27.5B with COGS $5.7B vs. fixed costs of $16.3B. The cost of reality labs was $3.8B, let's assume for simplicity that it was all fixed costs. Plug those numbers into the formula, and it'd be a $2.5B loss. If their revenue was cut in half, they'd need to slim down massively in the non-RL segments to even break even, let alone be more profitable than now.
- threeseed 4y ago
  > TikTok continue to eat its lunch Is it though because the data doesn't suggest that. It suggests that TikTok is dominating amongst younger audiences and that short form video content is a specific segment.
  - zepppotemkin 4y ago
    Just from seeing what people watch while on the train these days I'd say it is, I get that it's not the best indicator
  - marcinzm 4y ago
    Facebook seems to be 90% ads for me nowadays. There's only a few groups/people whose updates I'd like to see and the constant irrelevant click bait ads aren't worth the effort.
- kevinventullo 4y ago
  To be honest, I agreed with everything you said except it not being a strong argument.
xboxnolifes 4y ago
Argument: The price is low because it's not expected to go back up (soon). Why do you believe it'll go back up from this price point instead of dropping another 50%+?
noncoml 4y ago
I don’t think past price is part of a stock’s fundamentals
- kuwoze 4y ago
  The smartest comment of this thread. If they would only listen...
rr888 4y ago
> argument against buying at this price point? Do you know anyone who uses Facebook any more? How many Instagram users you know look at the ads?
- Handytinge 4y ago
  With 2 billion DAY, odds are yes, you do. If you don't, you're likely the outlier here.
rubiquity 4y ago
There's an old adage for your line of thought: What do you call a stock that's down 90%? A stock that was down 80% and cut in half again.
jesuscript 4y ago
The argument is all stocks were at all time highs last year other than physical Covid related stocks (hotels, etc). Everything was taken back to pre Covid levels. So if you can imagine we are back in 2019, whatever Facebooks price was, plus declining user base, and the Apple fuck you, it has room to drop.
adam_arthur 4y ago
Well, if your judgment of fair value is driven by relative price alone, and not fundamentals, you can believe whatever you want about what’s cheap or expensive. If you look at history, everything converges back to fundamentals in the long run; as many tech investors are starting to find out. But to answer more directly, the current price is only good value if Facebook can grow its earnings over time. Right now they’re shrinking. Companies with shrinking earnings tend to get single digit multiples
lostdog 4y ago
For the past 7+ years Facebook has continually made its product worse for its users. They are making the same type of product decisions today, so they will continue to bleed users.
deleted 4y ago
[deleted]
nemothekid 4y ago
>Can someone make an argument against buying at this price point? The only way I see them recovering is regulatory action, either: 1. The White House bans tiktok, (hopefully, in FB's case) shifting TikTok's eyeballs to Instagram. 2. The White House forces Apple to undo informed tracking consent. Personally, I believe Facebook was digging their own grave in 2010 and handled the privacy problem incredibly poorly. While consumers were unlikely to stop using Facebook, it left them wide open for Apple to kneecap them and now Zuckerberg's, likely correct, concerns that Apple doesn't really care about privacy falls completely on deaf ears.
- r00fus 4y ago
  There has been a lot of discussion and bipartisan political will to force Bytedance to sell TikTok to a US company. Zuck needs to push his lobbying minions to make that the full-court press on Capitol Hill.
  - mhoad 4y ago
    Wasn’t that just some random Trump brainfart that went nowhere and was officially taken off the table?
    - Jerrrry 4y ago
      Just like when Trump brainfart'ed and told Germany that Russia was going to wield its energy dependency as a realpolitik ploy, and was called a idiotic shill for it? And that's exactly what happened...? The president, orange or grey, is privy to information we are not. Tiktok is a national security threat; orange-man-bad isn't a staple in any useful political discourse.
      - mhoad 4y ago
        You seem to have replied to an argument nobody was making.
- Handytinge 4y ago
  You understand both Tiktok and Facebook operate in the global market, right? Only about 10% of Facebook's DAUs are in the USA. Neither of the things you mentioned have any impact on 90% of Facebook's users.
noncoml 4y ago
2000, CSCO was $69. Still hasn’t reached those levels since. Good enough argument?
- paulpauper 4y ago
  it has paid a lot of dividends though
  - noncoml 4y ago
    How is this an argument? Price is taking into consideration the dividends. Also Cisco didn’t start paying dividend until 2011, when CSCO was trading at $20 or so. If you think that $69 is a good price to pay for CSCO I’m happy to sell you as many stocks as you want.
    - badpun 4y ago
      Point is, you as an investor need to add the total of dividends over time to the current price and only then compare against your buy price to see if you're ahead or not.
jsemrau 4y ago
[1] Due to macroeconomic condition marketing spend by companies is decreasing -> Lower revenue [2] New entrants in the social ad-tech market (Apple, Uber, Netflix, Youtube, etc) take a slice of a shrinking market [3] Privacy regulations shrink market further So while they are still insanely profitable for their core business the growth story is over.
skippyboxedhero 4y ago
Zuckerberg runs it. In no other company would a CEO be allowed to essentially go rogue like this. All companies with dual-class shares will eventually trade at a discount, this is FB's time. I don't even think the Metaverse is a bad idea, but applying the SV mentality of: we just need to lose more money than anyone else won't work, that isn't how the real world works unless you have someone even dumber to pay you off (i.e. stupider VC fund, IPO)...FB is top of the food chain, no-one else is coming in on this. They either need to slow the cash burn (the numbers are just ludicrous) or spin the company (not possible). This kind of thing happens and the discount can last literally decades. With dual-class share, there is no way to close it and most investors know this so they are just selling. I will say it again: dual-share class isn't smart, the market isn't dumb, investors aren't stupid, it will go wrong eventually and everyone else is paying the price for Zuckerberg's own desire for self-aggrandizement.
- deleted 4y ago
  [deleted]
- pardesi 4y ago
  Agree. I am not going to invest into dual-class share companies anymore. Learnt hard lesson with FB
- bitL 4y ago
  Mark is facing innovator dilemma. Should he pivot the company to a new field while he still has funds or just wait until the zombification finishes his baby off? Maybe the way he chose is not optimal, maybe Reality Labs should be completely ambidextrous without any link to FB outside funding?
  - skippyboxedhero 4y ago
    Right, but the problem would still be that Zuckerberg controls both so would still overfund VR. You could spin off, but it is losing too much. Zuckerberg could buy out, but then you have a CEO splitting his time with his side piece...and if that takes off, then you look like a complete asshole for stiffing public shareholders. To be clear though: he has created this situation. If he lost a reasonable amount of money, none of these questions would be asked. Anything north of $10bn is just madness, $5bn is bad, $2-3 is probably about right. It is all sustainable within the current situation, he just has no-one telling him how bad this all looks (what it looks like now is the opposite of the final scenario: man who is worth hundreds of billions rinses public shareholders for his fever dream VR fantasy). Innovator's dilemma is all operational, so it should be separate from FB. Capital allocation choices are distinct from all this (the innovator's dilemma exists because CEOs are usually terrible investors/capital allocators, there are maybe 20 CEOs who have ever run a public company who can allocate capital well, Zuck actually had a decent rep before this because of his acquisitions but he is torching it with VR, which is clearly very far from commercial revenue).
fallingfrog 4y ago
Market prices are a reflection of the economy, they are not themselves the economy. Trying to use the reflection to predict the reflection is self referential- even though lots of people do it, which is why the market often behaves like it's huffing paint. I think it's better to base assessments on base reality. Example: the share price of K-Mart was 134 dollars in 2007. Now it's 15 cents. And people were buying the dip all the way down. Think it will come back? After all, no company lasts forever. Eventually they all go to zero and are replaced by some other company. That's why buying the dip just because it's a dip is a fool's game.
- herpderperator 4y ago
  Counterpoint: It was $0.01 a year ago, and now it's $0.15. How's 1400%?
  - lotsofpulp 4y ago
    You would need volume to discern that, right? https://finance.yahoo.com/quote/SHLDQ/ https://finance.yahoo.com/quote/SHLDQ/ Does not seem that great of a gamble for a few thousand dollar gain at most. Las Vegas seems like it would be more fun.
HarHarVeryFunny 4y ago
The stock's price in the past is irrelevant. The question you should be asking is what are the company's earnings growth prospects going forwards, and how does that compare to the stock's current valuation.

senko 4y ago

Yes. VR strategy fails, acquisitions stop due to regulatory issues, loses ad marketshare to Apple, TikTok continue to eat its lunch. As a result, stock gets even lower. There you have it. Is this a very strong argument? Probably not, no, but it's a possibility.

ethbr0 4y ago
+ Recession causes Facebook's primary ad customers to slash advertising spending to save money.
- colinmhayes 4y ago
  Facebook's revenue could cut in half and they could easily make more profit than they did this quarter just by getting rid of reality labs. The only thing holding the stock back at this point is Mark and I guess the fear that no one will use facebook 20 years from now.
  - hustwindmaple1 4y ago
    Getting rid of reality labs, then what? Be a sitting duck and getting attacked by Tiktok/Apple left and right? They have basically no moat now. VR is prob. the only thing that remotely looks promising for META now.
    - colinmhayes 4y ago
      Facebook still has 3 billion daily users. For all the doom and gloom it’s doing fine. Yes it’ll probably slowly fade into history but that will take decades.
      - samatman 4y ago
        By the end of the decade people will feel about Facebook the way they feel about Game of Thrones. Vaguely remember when it was a big deal, but not why.
        ethbr0 4y ago
        This undervalues Facebook's social network moat, which is honestly what they should be leaning into: a more interactive Yellow Pages / local groups directory. That's much harder for competitors to disrupt, especially when you give people tools to amass and customize content on their pages. E.g. wiki's, info, etc.
        samatman 4y ago
        There's no moat. Inertia isn't a moat. Source: I've re-spanned my social graph several times since Usenet. It's fine. People aren't corporations.
      - kevinventullo 4y ago
        That doesn’t make for a compelling buy signal. In principle, you should buy a stock because you believe you will be repaid in dividends over time. If the ship is sinking, even slowly, those dividends are not terribly appealing.
    - badpun 4y ago
      By that logic, Google has even less of a moat? I mean, anyone with money can just make a decent search engine.
  - jsnell 4y ago
    How do you reckon that? Back of the envelope, their profit in your scenario should be about (revenue - COGS) / 2 - (fixed costs - fixed cost of reality labs) Their revenue was $27.5B with COGS $5.7B vs. fixed costs of $16.3B. The cost of reality labs was $3.8B, let's assume for simplicity that it was all fixed costs. Plug those numbers into the formula, and it'd be a $2.5B loss. If their revenue was cut in half, they'd need to slim down massively in the non-RL segments to even break even, let alone be more profitable than now.
threeseed 4y ago
> TikTok continue to eat its lunch Is it though because the data doesn't suggest that. It suggests that TikTok is dominating amongst younger audiences and that short form video content is a specific segment.
- zepppotemkin 4y ago
  Just from seeing what people watch while on the train these days I'd say it is, I get that it's not the best indicator
- marcinzm 4y ago
  Facebook seems to be 90% ads for me nowadays. There's only a few groups/people whose updates I'd like to see and the constant irrelevant click bait ads aren't worth the effort.
kevinventullo 4y ago
To be honest, I agreed with everything you said except it not being a strong argument.

xboxnolifes 4y ago

Argument: The price is low because it's not expected to go back up (soon). Why do you believe it'll go back up from this price point instead of dropping another 50%+?

noncoml 4y ago

I don’t think past price is part of a stock’s fundamentals

kuwoze 4y ago
The smartest comment of this thread. If they would only listen...

rr888 4y ago

> argument against buying at this price point? Do you know anyone who uses Facebook any more? How many Instagram users you know look at the ads?

Handytinge 4y ago
With 2 billion DAY, odds are yes, you do. If you don't, you're likely the outlier here.

rubiquity 4y ago

There's an old adage for your line of thought: What do you call a stock that's down 90%? A stock that was down 80% and cut in half again.

jesuscript 4y ago

The argument is all stocks were at all time highs last year other than physical Covid related stocks (hotels, etc). Everything was taken back to pre Covid levels. So if you can imagine we are back in 2019, whatever Facebooks price was, plus declining user base, and the Apple fuck you, it has room to drop.

adam_arthur 4y ago

Well, if your judgment of fair value is driven by relative price alone, and not fundamentals, you can believe whatever you want about what’s cheap or expensive. If you look at history, everything converges back to fundamentals in the long run; as many tech investors are starting to find out. But to answer more directly, the current price is only good value if Facebook can grow its earnings over time. Right now they’re shrinking. Companies with shrinking earnings tend to get single digit multiples

lostdog 4y ago

For the past 7+ years Facebook has continually made its product worse for its users. They are making the same type of product decisions today, so they will continue to bleed users.

deleted 4y ago

[deleted]

nemothekid 4y ago

>Can someone make an argument against buying at this price point? The only way I see them recovering is regulatory action, either: 1. The White House bans tiktok, (hopefully, in FB's case) shifting TikTok's eyeballs to Instagram. 2. The White House forces Apple to undo informed tracking consent. Personally, I believe Facebook was digging their own grave in 2010 and handled the privacy problem incredibly poorly. While consumers were unlikely to stop using Facebook, it left them wide open for Apple to kneecap them and now Zuckerberg's, likely correct, concerns that Apple doesn't really care about privacy falls completely on deaf ears.

r00fus 4y ago
There has been a lot of discussion and bipartisan political will to force Bytedance to sell TikTok to a US company. Zuck needs to push his lobbying minions to make that the full-court press on Capitol Hill.
- mhoad 4y ago
  Wasn’t that just some random Trump brainfart that went nowhere and was officially taken off the table?
  - Jerrrry 4y ago
    Just like when Trump brainfart'ed and told Germany that Russia was going to wield its energy dependency as a realpolitik ploy, and was called a idiotic shill for it? And that's exactly what happened...? The president, orange or grey, is privy to information we are not. Tiktok is a national security threat; orange-man-bad isn't a staple in any useful political discourse.
    - mhoad 4y ago
      You seem to have replied to an argument nobody was making.
Handytinge 4y ago
You understand both Tiktok and Facebook operate in the global market, right? Only about 10% of Facebook's DAUs are in the USA. Neither of the things you mentioned have any impact on 90% of Facebook's users.

noncoml 4y ago

2000, CSCO was $69. Still hasn’t reached those levels since. Good enough argument?

paulpauper 4y ago
it has paid a lot of dividends though
- noncoml 4y ago
  How is this an argument? Price is taking into consideration the dividends. Also Cisco didn’t start paying dividend until 2011, when CSCO was trading at $20 or so. If you think that $69 is a good price to pay for CSCO I’m happy to sell you as many stocks as you want.
  - badpun 4y ago
    Point is, you as an investor need to add the total of dividends over time to the current price and only then compare against your buy price to see if you're ahead or not.

jsemrau 4y ago

[1] Due to macroeconomic condition marketing spend by companies is decreasing -> Lower revenue [2] New entrants in the social ad-tech market (Apple, Uber, Netflix, Youtube, etc) take a slice of a shrinking market [3] Privacy regulations shrink market further So while they are still insanely profitable for their core business the growth story is over.

skippyboxedhero 4y ago

Zuckerberg runs it. In no other company would a CEO be allowed to essentially go rogue like this. All companies with dual-class shares will eventually trade at a discount, this is FB's time. I don't even think the Metaverse is a bad idea, but applying the SV mentality of: we just need to lose more money than anyone else won't work, that isn't how the real world works unless you have someone even dumber to pay you off (i.e. stupider VC fund, IPO)...FB is top of the food chain, no-one else is coming in on this. They either need to slow the cash burn (the numbers are just ludicrous) or spin the company (not possible). This kind of thing happens and the discount can last literally decades. With dual-class share, there is no way to close it and most investors know this so they are just selling. I will say it again: dual-share class isn't smart, the market isn't dumb, investors aren't stupid, it will go wrong eventually and everyone else is paying the price for Zuckerberg's own desire for self-aggrandizement.

deleted 4y ago
[deleted]
pardesi 4y ago
Agree. I am not going to invest into dual-class share companies anymore. Learnt hard lesson with FB
bitL 4y ago
Mark is facing innovator dilemma. Should he pivot the company to a new field while he still has funds or just wait until the zombification finishes his baby off? Maybe the way he chose is not optimal, maybe Reality Labs should be completely ambidextrous without any link to FB outside funding?
- skippyboxedhero 4y ago
  Right, but the problem would still be that Zuckerberg controls both so would still overfund VR. You could spin off, but it is losing too much. Zuckerberg could buy out, but then you have a CEO splitting his time with his side piece...and if that takes off, then you look like a complete asshole for stiffing public shareholders. To be clear though: he has created this situation. If he lost a reasonable amount of money, none of these questions would be asked. Anything north of $10bn is just madness, $5bn is bad, $2-3 is probably about right. It is all sustainable within the current situation, he just has no-one telling him how bad this all looks (what it looks like now is the opposite of the final scenario: man who is worth hundreds of billions rinses public shareholders for his fever dream VR fantasy). Innovator's dilemma is all operational, so it should be separate from FB. Capital allocation choices are distinct from all this (the innovator's dilemma exists because CEOs are usually terrible investors/capital allocators, there are maybe 20 CEOs who have ever run a public company who can allocate capital well, Zuck actually had a decent rep before this because of his acquisitions but he is torching it with VR, which is clearly very far from commercial revenue).

fallingfrog 4y ago

Market prices are a reflection of the economy, they are not themselves the economy. Trying to use the reflection to predict the reflection is self referential- even though lots of people do it, which is why the market often behaves like it's huffing paint. I think it's better to base assessments on base reality. Example: the share price of K-Mart was 134 dollars in 2007. Now it's 15 cents. And people were buying the dip all the way down. Think it will come back? After all, no company lasts forever. Eventually they all go to zero and are replaced by some other company. That's why buying the dip just because it's a dip is a fool's game.

herpderperator 4y ago
Counterpoint: It was $0.01 a year ago, and now it's $0.15. How's 1400%?
- lotsofpulp 4y ago
  You would need volume to discern that, right? https://finance.yahoo.com/quote/SHLDQ/ https://finance.yahoo.com/quote/SHLDQ/ Does not seem that great of a gamble for a few thousand dollar gain at most. Las Vegas seems like it would be more fun.

HarHarVeryFunny 4y ago

The stock's price in the past is irrelevant. The question you should be asking is what are the company's earnings growth prospects going forwards, and how does that compare to the stock's current valuation.