Meta: No-Brakes Rollercoaster With Key Earnings On Deck (NASDAQ:META)

Luis Alvarez
Meta Stock: No Brakes
Perhaps no stock better sums up 2023’s market than Meta (NASDAQ:META), the company formerly known as Facebook. As of my writing this, Meta is up by an astonishing 136% for the year and over triple the price it traded for at the November lows. This happened after the company weathered a crisis that sent its share price tumbling over 75% from its 2021 high. This begs the question – was Meta too cheap in November 2022, too expensive in 2021, or both? And with Meta set to report earnings after the bell on Wednesday, July 26, should investors cash in, stay put, or buy more?
Meta stock had two modes over the past five years – the stock is almost always either crashing or soaring. This is actually somewhat of a new development for the company after the highly-publicized IPO debacle the company grew steadily and delivered great shareholder returns until mid-2018. Then the rollercoaster started, with the 2018 bear market, COVID, bulls firmly taking charge in 2021, and a mass panic in 2022 on fears that Mark Zuckerberg would drive the company into the ground. Zuckerberg pivoted quickly and quietly, and Meta’s status as a moneymaking machine was soon restored. Of course, the world is waiting with bated breath for whether Zuckerberg and Elon Musk will actually fight in the Octagon. I’d love to see it, but I’d imagine their respective boards of directors and lawyers aren’t as keen.
As a quick reality check, pulling up Meta’s financial statements (read them for yourself) tells a somewhat different story from the stock price chaos that I believe is instructive for investors. Revenue grew every year like clockwork until 2022, and net income is always positive and volatile but mostly growing. Ditto for EPS. Meta’s business is actually decently run, but the stock is a bona fide roulette wheel.
What Should We Consider When Valuing Meta?
For my first decade in the markets, I didn’t have much of a formal framework for how to take advantage of volatility. There are a lot of short-term strategies that you can potentially employ, but the strategy that I believe is most effective is to use volatility to buy assets below their fair value and sell assets that are above their fair value. This might not be super obvious with the S&P 500 (SPY) or the Nasdaq (QQQ) move, but it’s incredibly obvious when stuff like preferred stocks and corporate bonds are trading at big discounts to their contractual value during big market selloffs.
For single stocks, I think investors are best off employing a similar strategy, which is to buy/sell stocks when changes in their stock price (panic/euphoria) don’t reflect changes in the underlying business. Generally, on big moves in short periods of time, the market is going to tend to overreact.
- Companies that show a lot of variability in earnings don’t deserve as high of a multiple as companies that are more stable. The fact that Meta’s earnings peaked at about $14 in 2021 and are at $8.08 for the TTM means you may want to avoid paying up too much for the stock. This same fact, however, meant Meta was a screaming deal for ~10x earnings in November.
- Now Meta is trading for ~30x earnings. There hasn’t been a huge change in the company’s actual earnings at this point, analysts expect about $2.91 for the quarter. This compares with $2.47 in the same quarter in 2022 but $3.67 in 2021. Analysts expect continued big earnings growth back to what the company was earning in 2021, but will that actually happen? So far, the company is driving income gains by cutting costs, but the investor fear here is that PPP money and stimulus in 2021 drove a once-in-a-lifetime ad-spending boom, so those earnings will be hard to match for quite some time.
- For the company to continue trading at ~30x earnings, there needs to be a lot of consistent, sustained growth in the future. But this idea of consistency has already been busted. Getting back to peak 2021 earnings will likely be an uphill battle for big tech at large, and the situation is worse for Meta than some others because the ad market is more correlated with the broader economy than say, cloud computing. Over the past year, Meta has gone from panic to euphoria, and it seems likely that the euphoria has overshot.
2023 Fair Value Estimates For Meta Stock
Figuring earnings of roughly $11 and given the factors discussed prior, I’d be inclined to value Meta somewhere from 17x ($187) to 20x earnings ($220), which is a lot higher than it traded last fall but a lot lower than it trades for now. This is giving Meta credit for higher earnings after shifting away from pumping billions into the Metaverse debacle. Valuing the stock higher than the present valuation requires some mental gymnastics in your assumptions such as:
- Threads taking all of Twitter’s business. Twitter doesn’t have that much business to take anyway, and Meta’s launch of threads was helped by an incredibly slick signup funnel that generated tons of signups but isn’t likely to lead to a ton of actual users. Remember when Facebook launched Instagram stories? It’s a good product, but it didn’t exactly crush Snapchat (SNAP).
- AI hegemony. The market is seemingly pricing every AI-adjacent stock as if they’ll have a monopoly when in actuality they’re all competing with each other. We see some analysts predicting large earnings gains already from AI for Meta, and it will be interesting to see whether this comes to fruition. Other analysts have questioned how companies intend to foot the bill for AI-server costs, given that the products are largely being given away for free so far and will likely be bundled in the future.
- The startup-driven spend-whatever ad market in 2021 being secular rather than cyclical. I don’t see this either.
Although caution is warranted, I’m curious to follow this week’s earnings and conference call for clues about where the company is looking to drive growth going forward.
Bottom Line
As a general rule, when a stock triples in less than a year it’s going to be an overreaction. There are some exceptions to this with companies near bankruptcy, but if we think of stock moves as signal + noise, then the largest moves in the shortest periods of time are likely to contain more noise. For example, if you had the foresight to go all-in on Microsoft (MSFT) at its 1986 IPO, you’d have earned about 26% per year. That’s good enough to make you filthy rich if you’d held, but a lot less than 100% every six months. Meta tripling here feels overdone, and while the stock has some momentum, it’s a close call between holding until the momentum breaks or selling now and cashing in. That’s my opinion, but feel free to share yours in the comments!
Former Myanmar colonel who once served as information minister gets 10-year prison term for sedition

BANGKOK (AP) — A former high-profile Myanmar army officer who had served as information minister and presidential spokesperson in a previous military-backed government has been convicted of sedition and incitement, a legal official said Thursday. He was sentenced to 10 years in prison.
Ye Htut, a 64-year old retired lieutenant colonel, is the latest in a series of people arrested and jailed for writing Facebook posts that allegedly spreading false or inflammatory news. Once infrequently prosecuted, there has been a deluge of such legal actions since the army seized power from the elected government of Aung San Suu Kyi in February 2021.
He was arrested in late October after a military officer from the Yangon Regional Military Command reportedly filed a change against him, around the time when some senior military officers were purged on other charges, including corruption. He was convicted on Wednesday, according to the official familiar with the legal proceedings who insisted on anonymity for fear of being punished by the authorities.
Ye Htut had been the spokesperson from 2013 to 2016 for President Thein Sein in a military-backed government and also information minister from 2014 to 2016.
After leaving the government in 2016, Ye Htut took on the role of a political commentator and wrote books and posted articles on Facebook. For a time, he was a visiting senior research fellow at the ISEAS-Yusof Ishak Institute, a center for Southeast Asia studies in Singapore.
After the army’s 2021 takeover, he often posted short personal vignettes and travel essays on Facebook in which he made allusions that were generally recognized to be critical of Myanmar’s current military rulers.
The army’s takeover triggered mass public protests that the military and police responded to with lethal force, triggering armed resistance and violence that has escalated into a civil war.
The official familiar with the court proceedings against Ye Htut told The Associated Press that he was sentenced by a court in Yangon’s Insein prison to seven years for sedition and three years for incitement. Ye Htut was accused on the basis of his posts on his Facebook account, and did not hire a lawyer to represent him at his trial, the official said.
The sedition charge makes disrupting or hindering the work of defense services personnel or government employees punishable by up to seven years in prison. The incitement charge makes it a crime to publish or circulate comments that cause fear, spread false news, agitate directly or indirectly for criminal offences against a government employee — an offense punishable by up to three years in prison.
However, a statement from the Ministry of Legal Affairs said he had been charged under a different sedition statute. There was no explanation for the discrepancy.
According to detailed lists compiled by the Assistance Association for Political Prisoners, a watchdog group based in Thailand, 4,204 civilians have died in Myanmar in the military government’s crackdown on opponents and at least 25,474 people have been arrested.
Top CIA agent shared pro-Palestinian to Facebook after Hamas attack: report

A high-ranking CIA official boldly shared multiple pro-Palestinian images on her Facebook page just two weeks after Hamas launched its bloody surprise attack on Israel — while President Biden was touring the Jewish state to pledge the US’s allegiance to the nation.
The CIA’s associate deputy director for analysis changed her cover photo on Oct. 21 to a shot of a man wearing a Palestinian flag around his neck and waving a larger flag, the Financial Times reported.
The image — taken in 2015 during a surge in the long-stemming conflict — has been used in various news stories and pieces criticizing Israel’s role in the violence.
The CIA agent also shared a selfie with a superimposed “Free Palestine” sticker, similar to those being plastered on businesses and public spaces across the nation by protesters calling for a cease-fire.
The Financial Times did not name the official after the intelligence agency expressed concern for her safety.
“The officer is a career analyst with extensive background in all aspects of the Middle East and this post [of the Palestinian flag] was not intended to express a position on the conflict,” a person familiar with the situation told the outlet.
The individual added that the sticker image was initially posted years before the most recent crisis between the two nations and emphasized that the CIA official’s Facebook account was also peppered with posts taking a stand against antisemitism.
The latest post of the man waving the flag, however, was shared as Biden shook hands with Israeli leaders on their own soil in a show of support for the Jewish state in its conflict with the terrorist group.
Biden has staunchly voiced support for the US ally since the Oct. 7 surprise attack that killed more than 1,300 people, making the CIA agent’s posts in dissent an unusual move.
In her role, the associate deputy director is one of three people, including the deputy CIA director, responsible for approving all analyses disseminated inside the agency.
She had also previously overseen the production of the President’s Daily Brief, the highly classified compilation of intelligence that is presented to the president most days, the Financial Times said.
“CIA officers are committed to analytic objectivity, which is at the core of what we do as an agency. CIA officers may have personal views, but this does not lessen their — or CIA’s — commitment to unbiased analysis,” the CIA said in a statement to the outlet.
Follow along with The Post’s live blog for the latest on Hamas’ attack on Israel
Neither the Office of the Director of National Intelligence nor the White House responded to The Post’s request for comment.
All of the official’s pro-Palestinian images and other, unrelated posts have since been deleted, the outlet reported.
The report comes as CIA Director William Burns arrived in Qatar, where he was due to meet with his Israeli and Egyptian counterparts and the Gulf state’s prime minister to discuss the possibility of extending the pause in fighting between Israeli forces and Hamas terrorists in the Gaza Strip for a second time.
Israel and Hamas agreed Monday to an additional two-day pause in fighting, meaning combat would likely resume Thursday morning Israel time if no additional halt is brokered.
Both sides agreed to release a portion of its hostages under the arrangement.
More than 14,000 Palestinians in Gaza, including many women and children, have been killed in the conflict, according to data from the Hamas-controlled Ministry of Health.
Lee Hsien Yang faces damages for defamation against two Singapore ministers over Ridout Road rentals

SINGAPORE — The High Court in Singapore has directed Lee Hsien Yang to pay damages to ministers K. Shanmugam and Vivian Balakrishnan for defamatory statements made in Facebook comments regarding their rental of black-and-white bungalows on Ridout Road.
The court issued a default judgment favouring the two ministers after Lee – the youngest son of Singapore’s founding prime minister Lee Kuan Yew and brother of current Prime Minister Lee Hsien Loong – failed to address the defamation lawsuits brought against him. Lee had, among other claims, insinuated that the ministers engaged in corrupt practices and received preferential treatment from the Singapore Land Authority for their bungalow rentals.
The exact amount of damages will be evaluated in a subsequent hearing.
Restricted from spreading defamatory claims against ministers
Not only did Justice Goh Yi Han grant the default judgment on 2 November, but he also imposed an injunction to prohibit Lee from further circulating false and defamatory allegations.
In a released written judgment on Monday (27 November), the judge highlighted “strong reasons” to believe that Lee might persist in making defamatory statements again, noting his refusal to remove the contentious Facebook post on 23 July, despite receiving a letter of demand from the ministers on 27 July.
Among other things, Lee stated in the post that “two ministers have leased state-owned mansions from the agency that one of them controls, felling trees and getting state-sponsored renovations.”
A report released by the Corrupt Practices Investigation Bureau in June concluded that no wrongdoing or preferential treatment had occurred concerning the two ministers. However, Lee continued referencing this post and the ongoing lawsuits, drawing attention to his remarks under legal scrutiny.
Justice Goh emphasised that the ministers met the prerequisites for a default judgment against Lee. The suits, separately filed by Shanmugam, the Law and Home Affairs Minister, and Dr Balakrishnan, the Foreign Affairs Minister, were initiated in early August.


He failed to respond within 21 days
Lee and his wife, Lee Suet Fern, had left Singapore in July 2022, after declining to attend a police interview for potentially giving false evidence in judicial proceedings over the late Lee Kuan Yew’s will.
His absence from Singapore prompted the court to permit Shanmugam and Dr Balakrishnan to serve him legal documents via Facebook Messenger in mid-September. Despite no requirement for proof that Lee saw these documents, his subsequent social media post on 16 September confirmed his awareness of the served legal papers.
Although Lee had the opportunity to respond within 21 days, he chose not to do so. Additionally, the judge noted the novelty of the ministers’ request for an injunction during this legal process, highlighting updated court rules allowing such measures since April 2022.
Justice Goh clarified that despite the claimants’ application for an injunction, the court needed independent validation for its appropriateness, considering its potentially severe impact on the defendant. He reiterated being satisfied with the circumstances and granted the injunction, given the continued accessibility of the contentious Facebook post.
Lee acknowledges court order and removes allegations from Facebook
Following the court’s decision, Lee acknowledged the court order on 10 November and removed the statements in question from his Facebook page.
In the judgment, Justice Goh noted that there were substantial grounds to anticipate Lee’s repetition of the “defamatory allegations by continuing to draw attention to them and/or publish further defamatory allegations against the claimants.”
The judge mentioned that if Lee had contested the ministers’ claims, there could have been grounds for a legally enforceable case under defamation law.
According to Justice Goh, a reasonable reader would interpret Lee’s Facebook post as insinuating that the People’s Action Party’s trust had been squandered due to the ministers’ alleged corrupt conduct, from which they gained personally.
While Shanmugam and Dr Balakrishnan were not explicitly named, the post made it evident that it referred to them, and these posts remained accessible to the public, as noted by the judge.
Justice Goh pointed out that by choosing not to respond to the lawsuits, Lee prevented the court from considering any opposing evidence related to the claims.
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