Very similar to yesterday's post on PYPL. Similar methodology and tools used.
Disclaimer: I do not hold FB and may not hold going forward as well. Massive price drop on earnings prompted me to dig a little more and do this analysis. All the methods are derived from free and open source scripts aimed at finding statistical and fundamental edge.
Point of this analysis is to understand if the massive price drop is justified or if this is an overreaction based on fundamentals and stats.
🎲 Earnings
Reported revenue and profit for this quarter is not too far from the estimated guidance. 🟡
Guidance for future earnings and revenue is weak. 25% drop in Q1 earnings estimates whereas 15% drop in Q1 revenue estimates. 🔴
Last year Q1 had similar drop where EPS dropped by 16% and revenue dropped by 10%. Hence, this drop may be season. 🟡
🎲 Financial stability There is no doubt that financial position of FB is still very strong with low levels of debt and strong overall returns and margin. 🟢
🎲 Growth Projections Based on the history, growth isn't concerning point too. However net income and book value seems to be stagnating and rate of increase of earnings and revenue seems to be dropping. This may not be concern for companies such as FB which are too big. 🟡
🎲 Drawdown from ATH Present drawdown from ATH is around 36% and according to stats, this drop is 90th percentile. Meaning stock has had such a drawdown for only 10% of its trading time in the history. This may mean bargain for those who are willing to invest on the basis of value. 🟢
🎲 Comparison with fundamentals Drop in fundamentals does not look too alarming. 🟢 Please note that range mentioned is percentile range. Book value per share is at 3.6 percentile even though it is not too far from peak. This is because not often FB's book value dropped in the overall history - which itself is quite impressive.
@Vibranium_Capital, Thats nice of you to donate coins even when you disagree :)
Well, don't mind discussing if there is any specific things you disagree and why!!
Liquor_and_Leverage
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Disagree if I'm being frank. I might buy deep OTM puts on this. Their whole value prop is ads. The whole Meta thing is a great cash burner and the upside is low. Nobody is buying AR/VR when they can't put food on the table or get dopamine hits via social media. Think inflation of 15% on meat is good? Here, try spending 1K on AR/VR equipment or 3M on a house in the "metaverse". Not a great play in the near term, but appreciate the analysis.
Facebook is dying and are trying to pivot similar to AMZN. AMZN actually provides a valuable product "AWS" and FB is stretching with AR/VR, which few will buy into. Again, does AR/VR solve a problem? Is there a demand for this product? Is Peloton just an iPad strapped to a bike? At least AWS solves business problems.