We added to META as a myriad of fears from regulation to TikTok to Zuckerberg having gone AWOL has reached an all-time high. Here is what the market thinks of Zuckerberg’s capital allocation (keeping in mind Zuckerberg has a phenomenal track record with monetizing the core business to purchasing Instagram and WhatsApp). The core business earns about 32B (using about 15B for maintenance capex). Between RL and growth capex, META is spending roughly 27B. Using a conservative 10x multiple on 2022 EBIT, one arrives at $320B. META currently trades at an EV of $280B. The market is ascribing a value of negative $40B to META’s growth expenses. We find this to be draconian and the market is likely overly pessimistic.
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