3 ms·

$16B in FCF in 2017 Thats what you call "printing cash".

by mbesto 9y ago

spyspy 9y ago
I've been long FB for a very long time now, and took the recent dip to grab some more. People can complain about Facebook in terms of privacy all they want, but as a company they are killing it.
- heedlessly3 9y ago
  i remember people saying that Apple hardware and software quality has dwindle over the past couple years. They might be right, however, their 2017 Q3 revenues hit a new record.
- tclancy 9y ago
  >People can complain about Facebook in terms of privacy all they want, but as a company they are killing it. Should make for a nice tombstone.
  - spyspy 9y ago
    I think I'll survive.
kgwgk 9y ago
The question is whether that can justify a valuation 30 times as large.
- adventured 9y ago
  They're tracking to around a likely ~$23 billion in net income for 2018. That's a 20 PE three quarters out. That's for 50% sales growth, 63% net income growth. That's a bargain in this market. Microsoft has hardly net grown its income in a decade and it's sporting a 30 PE; nearly all of their valuation increase the last five years is multiple inflation. Coca Cola has a 30 PE ratio and nearly zero growth for a decade. The same for McDonald's. Boeing has a ~25 forward PE ratio for ~10% growth. Walmart is getting a mid 20s PE for barely any growth. The same pattern holds true across most of the traditional blue chips. It's even worse for other tech companies, the PE ratios there are hilariously inflated, from Workday or Salesforce to nVidia to Activision to Netflix & Amazon. If anything Facebook is considerably undervalued here vs the wider market. (note: I have no position in Facebook)
  - kgwgk 9y ago
    > That's a bargain in this market. When this market changes, some of these companies might suffer more than the others. What is going to happen to advertising budgets (practically their only source of revenue) in the next recession? Facebook also faces higher regulatory and reputational risk (in the US and elsewhere) that most of those companies. But of course compared to Netflix it looks incredibly undervalued! Edit: to be clear, I agree that Facebook's valuation is more reasonable than it used to be and more reasonable than other "similar" companies (but not without its own risks). By the way, it will be interesting to see how the sentiment around different sectors changes in September when a number of companies currently in IT and Discretionary/Media will be reclassified into the Communications sector.
    - mbesto 9y ago
      > What is going to happen to advertising budgets (practically their only source of revenue) in the next recession There's a general theory that advertising is a zero-sum game. In other words, as a percent of GDP it has neither grown or subtracted significantly since it's wide spread use. This effectively means that new media (FB/Google/etc) is simply taking market share away from other disparate providers. If anything, a recession will only accelerate that trend. When companies are faced with re-thinking their ad spend and realize that their eyeballs are no longer in print/radio, it serves as an easy to stomach switching cost decision. [0] - https://stratechery.com/2016/the-reality-of-missing-out/ https://stratechery.com/2016/the-reality-of-missing-out/
      - kgwgk 9y ago
        Advertising spending went down over 10% in 2009 compared to 2008 (I thought it was more than that). In that kind of environment Facebook might still gain share but growth and margins are likely to suffer. And Facebook/Google represent already one third of the advertising business in the US, they can only increase market share up to a point.
        mbesto 9y ago

$16B in FCF in 2017 Thats what you call "printing cash".

by mbesto 9y ago

$16B in FCF in 2017 Thats what you call "printing cash".

I've been long FB for a very long time now, and took the recent dip to grab some more. People can complain about Facebook in terms of privacy all they want, but as a company they are killing it.

heedlessly3 9y ago
i remember people saying that Apple hardware and software quality has dwindle over the past couple years. They might be right, however, their 2017 Q3 revenues hit a new record.
tclancy 9y ago
>People can complain about Facebook in terms of privacy all they want, but as a company they are killing it. Should make for a nice tombstone.
- spyspy 9y ago
  I think I'll survive.

kgwgk 9y ago

The question is whether that can justify a valuation 30 times as large.

adventured 9y ago
They're tracking to around a likely ~$23 billion in net income for 2018. That's a 20 PE three quarters out. That's for 50% sales growth, 63% net income growth. That's a bargain in this market. Microsoft has hardly net grown its income in a decade and it's sporting a 30 PE; nearly all of their valuation increase the last five years is multiple inflation. Coca Cola has a 30 PE ratio and nearly zero growth for a decade. The same for McDonald's. Boeing has a ~25 forward PE ratio for ~10% growth. Walmart is getting a mid 20s PE for barely any growth. The same pattern holds true across most of the traditional blue chips. It's even worse for other tech companies, the PE ratios there are hilariously inflated, from Workday or Salesforce to nVidia to Activision to Netflix & Amazon. If anything Facebook is considerably undervalued here vs the wider market. (note: I have no position in Facebook)
- kgwgk 9y ago
  > That's a bargain in this market. When this market changes, some of these companies might suffer more than the others. What is going to happen to advertising budgets (practically their only source of revenue) in the next recession? Facebook also faces higher regulatory and reputational risk (in the US and elsewhere) that most of those companies. But of course compared to Netflix it looks incredibly undervalued! Edit: to be clear, I agree that Facebook's valuation is more reasonable than it used to be and more reasonable than other "similar" companies (but not without its own risks). By the way, it will be interesting to see how the sentiment around different sectors changes in September when a number of companies currently in IT and Discretionary/Media will be reclassified into the Communications sector.
  - mbesto 9y ago
    > What is going to happen to advertising budgets (practically their only source of revenue) in the next recession There's a general theory that advertising is a zero-sum game. In other words, as a percent of GDP it has neither grown or subtracted significantly since it's wide spread use. This effectively means that new media (FB/Google/etc) is simply taking market share away from other disparate providers. If anything, a recession will only accelerate that trend. When companies are faced with re-thinking their ad spend and realize that their eyeballs are no longer in print/radio, it serves as an easy to stomach switching cost decision. [0] - https://stratechery.com/2016/the-reality-of-missing-out/ https://stratechery.com/2016/the-reality-of-missing-out/
    - kgwgk 9y ago
      Advertising spending went down over 10% in 2009 compared to 2008 (I thought it was more than that). In that kind of environment Facebook might still gain share but growth and margins are likely to suffer. And Facebook/Google represent already one third of the advertising business in the US, they can only increase market share up to a point.
      - mbesto 9y ago