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Why are we assuming that short term changes in share price have anything to do with underlying fundamentals? Meta prints money. They brought in $40B in net inc

by zhdc1 5y ago

Why are we assuming that short term changes in share price have anything to do with underlying fundamentals? Meta prints money. They brought in $40B in net income off of $115B in revenue last year. Income attributable to Facebook + WhatsApp + Instagram doubled from 2019 to 2021. They spend more on research and development than they do on expenses attributable to their core business. Yes, they're no longer growing. That was going to happen eventually. Yes, they're going to be targeted by extensive regulatory action. Yes, they're losing space - and users - to competitors. It's going to take a lot to kill them off. The social media scene changes fast and they're going into decline, but it doesn't change the fact that Meta is an extremely large advertising company with a lot of money and talent. This isn't MySpace 2.0. A $380B market valuation was likely unreasonable. A $200B market valuation for a company that earns $40B a year and is used by more than a third of the global population sounds very reasonable.

dijit 5y ago
> Why are we assuming that short term changes in share price I don't think the parent is making a strong claim in this direction, moreso that Facebook/Meta has very few new innovations and prefers to acquire them. Other companies are also quite profitable or have strong market caps but are also not innovating and prefer to acquire new innovations (Oracle being a prime example).
- ssharp 5y ago
  I read the comment as being critical of Facebook. "Not being able to innovate" seems like a critical statement, indicating a failure on their part. However, they are an incredibly successful company. If Facebook is successful not innovating, why would they want to hire innovators? Their hiring process should be specifically geared towards hiring the people that will execute the way Facebook wants to execute. Given that, they seem to have a successful hiring process.
  - zhdc1 5y ago
    > If Facebook is successful not innovating, why would they want to hire innovators? There's a larger question that I'm still trying to work out. Meta has something like 71K employees at this point and spends over $21B a year in research and development. They don't give head counts for how many personnel are performing R&D work, but if you assume that most of their R&D costs go to employee salaries and that the mean salary at Meta is around 500K, it looks like at least half of their workforce is engaged in R&D. What are they getting for this investment? Instagram, WhatsApp, and Oculus were all acquisitions. Facebook Messenger came out in 2008. I get that some of them are working to optimize their advertising revenue stream. Does this require 20-30K+ highly qualified engineers and support FTEs? Something else is going on. My guess is that it's a form of Parkinson's Law, only with IT engineers instead of British civil servants.
    - geoduck14 5y ago
      I've been dabbling in AI recently, and I keep seeing FB's name appear all over the place. They were associated with some work that wrote human readable instructions on how to cook something- given only a list of ingredients. I have no idea why they are interested in cooking, but there logo was watermarked on every page of the deck. I've also read how they are building a really big and fast computer cluster to do ML. I don't know what they are doing on it, but they probably doing some R and some D. So, yeah, I have FB on my list of innovators.
    - zhdc1 5y ago
      > I've been dabbling in AI recently, and I keep seeing FB's name appear all over the place. They were associated with some work that wrote human readable instructions on how to cook something- given only a list of ingredients. I have no idea why they are interested in cooking, but there logo was watermarked on every page of the deck. I've also read how they are building a really big and fast computer cluster to do ML. I don't know what they are doing on it, but they probably doing some R and some D. So, yeah, I have FB on my list of innovators. Don't get me wrong. There's a lot of innovation going on at Facebook. That's guaranteed to happen when you have as much talent as they do. Why isn't it translating over to their core business? Why do they have to continue to acquire companies (e.g., Oculus) to have potential areas for growth? It doesn't make any sense. They would have more significantly success if they simply took half of their engineers, organized them into teams of 3-4 people, and gave each team $1-2M in startup capital VC style. Let's say they can create 2.5K teams. This would cost them $2.5B - $5B, or about than one tenth of what they spent last year in stock repurchases.
  - kamaal 5y ago
    >>If Facebook is successful not innovating, why would they want to hire innovators? These companies have one cash cow business, and they want to hire the best people they can to keep the lights on. These people tend to go around selling their skills to other places who want the same. That's pretty much all there is to it. Innovation isn't even the goal of middle management in any large people operation. If anything its the opposite, no body wants disruption in established order of things.
- bartread 5y ago
  > moreso that Facebook/Meta has very few new innovations and prefers to acquire them. This isn't unique to facebook/Meta though: plenty of companies switch more toward the acquisition of innovation than the creation of it. Microsoft was like this for a long time. Apple, Google, and Amazon have also made their fair share of acquisitions over the years. Introducing new products/value propositions is hard, even in adjacent markets, and most will fail. It's often easier to acquire something instead once you reach the point where you can afford to do so.

by zhdc1 5y ago

dijit 5y ago

> Why are we assuming that short term changes in share price I don't think the parent is making a strong claim in this direction, moreso that Facebook/Meta has very few new innovations and prefers to acquire them. Other companies are also quite profitable or have strong market caps but are also not innovating and prefer to acquire new innovations (Oracle being a prime example).

ssharp 5y ago
I read the comment as being critical of Facebook. "Not being able to innovate" seems like a critical statement, indicating a failure on their part. However, they are an incredibly successful company. If Facebook is successful not innovating, why would they want to hire innovators? Their hiring process should be specifically geared towards hiring the people that will execute the way Facebook wants to execute. Given that, they seem to have a successful hiring process.
- zhdc1 5y ago
  > If Facebook is successful not innovating, why would they want to hire innovators? There's a larger question that I'm still trying to work out. Meta has something like 71K employees at this point and spends over $21B a year in research and development. They don't give head counts for how many personnel are performing R&D work, but if you assume that most of their R&D costs go to employee salaries and that the mean salary at Meta is around 500K, it looks like at least half of their workforce is engaged in R&D. What are they getting for this investment? Instagram, WhatsApp, and Oculus were all acquisitions. Facebook Messenger came out in 2008. I get that some of them are working to optimize their advertising revenue stream. Does this require 20-30K+ highly qualified engineers and support FTEs? Something else is going on. My guess is that it's a form of Parkinson's Law, only with IT engineers instead of British civil servants.
  - geoduck14 5y ago
    I've been dabbling in AI recently, and I keep seeing FB's name appear all over the place. They were associated with some work that wrote human readable instructions on how to cook something- given only a list of ingredients. I have no idea why they are interested in cooking, but there logo was watermarked on every page of the deck. I've also read how they are building a really big and fast computer cluster to do ML. I don't know what they are doing on it, but they probably doing some R and some D. So, yeah, I have FB on my list of innovators.
  - zhdc1 5y ago
    > I've been dabbling in AI recently, and I keep seeing FB's name appear all over the place. They were associated with some work that wrote human readable instructions on how to cook something- given only a list of ingredients. I have no idea why they are interested in cooking, but there logo was watermarked on every page of the deck. I've also read how they are building a really big and fast computer cluster to do ML. I don't know what they are doing on it, but they probably doing some R and some D. So, yeah, I have FB on my list of innovators. Don't get me wrong. There's a lot of innovation going on at Facebook. That's guaranteed to happen when you have as much talent as they do. Why isn't it translating over to their core business? Why do they have to continue to acquire companies (e.g., Oculus) to have potential areas for growth? It doesn't make any sense. They would have more significantly success if they simply took half of their engineers, organized them into teams of 3-4 people, and gave each team $1-2M in startup capital VC style. Let's say they can create 2.5K teams. This would cost them $2.5B - $5B, or about than one tenth of what they spent last year in stock repurchases.
- kamaal 5y ago
  >>If Facebook is successful not innovating, why would they want to hire innovators? These companies have one cash cow business, and they want to hire the best people they can to keep the lights on. These people tend to go around selling their skills to other places who want the same. That's pretty much all there is to it. Innovation isn't even the goal of middle management in any large people operation. If anything its the opposite, no body wants disruption in established order of things.
bartread 5y ago
> moreso that Facebook/Meta has very few new innovations and prefers to acquire them. This isn't unique to facebook/Meta though: plenty of companies switch more toward the acquisition of innovation than the creation of it. Microsoft was like this for a long time. Apple, Google, and Amazon have also made their fair share of acquisitions over the years. Introducing new products/value propositions is hard, even in adjacent markets, and most will fail. It's often easier to acquire something instead once you reach the point where you can afford to do so.