6 ms·

I’m speaking more to the stock price than Meta’s actions. Shares trading lower than they were 5 years ago. And many of the unprofitable growth companies down 80

by tempsy 4y ago

I’m speaking more to the stock price than Meta’s actions. Shares trading lower than they were 5 years ago. And many of the unprofitable growth companies down 80-90% in less than a year. Point is tech companies are highly sensitive to interest rates and now have to course correct in a world where the market is punishing excessive spending.

dafty4 4y ago
The stock price dive at Meta is pretty clearly due to the $10B hit from Apple’s Do Not Track Feature. Meta should make a free Android phone that allows tracking.
- tempsy 4y ago
  Nasdaq is down 30%. Clearly macro factors like rates and inflation and recessionary pressures are putting pressure on rate sensitive companies generally speaking. You can’t just say it’s ad tracking when dozens of mid and large cap tech stocks are down 30-80% ytd
  - paganel 4y ago
    > Clearly macro factors like rates and inflation To quote from the latest Economist [1]: > This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does. and > In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order. Sorry for the long quotes, it was the best I could do, I highly recommend that article in its entirety. [1] https://archive.ph/9GbfH https://archive.ph/9GbfH
    - subsubzero 4y ago
      Thanks for this, its confusing for many as to why growth companies(low/no-profit) are getting hit so hard due to rising interest rates and these quotes and the article linked explain the reasoning very well.
    - robocat 4y ago
      The NPV values didn’t look weird enough, but I got the same results from: https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php https://www.calculatorsoup.com/calculators/financial/net-pre... — Values used: Interest Rate = %5, Compounding = 1 times per Period, Line 0 = $0, Line 1 = 5000 periods of $100. However, I think the economist column/article misses some important points: 1: There is a stereotype that corporations only look at the next quarter’s earnings. The article argues the opposite, that corporations are long term focused. The article needs to address that point. 2: Stocks and dividends should be inflation proof (with some assumptions, such as revenues increase with inflation). 3. The article doesn’t seem to mention bonds, even though it talks about constant $ returns. What? The most interesting part of the article for me was “The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears.” [Slight edits]
- stocknoob 4y ago
  Do not track is an easy scapegoat, but I think the rise of TikTok is a larger factor. Meta lost users.
  - badwolf 4y ago
    I think this, along with a slew of other factors as well. Meta pivoting to burn money on a VR universe that nobody actually seems to want. Meta burning FB users by constantly altering their FB news feed, making it less and less a place for friends, and more a place to see endless reposted memes and ads for drop-ship products and stolen IP tshirts. Meta burning Instagram users by trying to force everyone's favorite photo-sharing app to be a shittier version of TikTok, as well as the above constant feed refactors...
  - disgruntledphd2 4y ago
    It's definitely the ATT changes, literally cratered all their direct response ads on iOS (i.e. rich people). TikTok is definitely a concern but turning off the money pump is a much, much bigger one.
  - retinaros 4y ago
    if this is tiktok they shouldnt worry for long i bet it will be banned before end of year
- Infinitesimus 4y ago
  Oh but they did! Meta leadership has always anticipated this risk. The problem is that they have not been able to fully mitigate it. Facebook Phone (rebranded HTC) was released in 2013 https://en.wikipedia.org/wiki/HTC_First https://en.wikipedia.org/wiki/HTC_First but had poor sales. The metaverse is their next play to build a world where they are a bit more shielded from Apple/Google/Microsoft's hardware influence. Pivoting a large business is really hard.
  - mistrial9 4y ago
    I appreciate when people inside FB/Meta speak directly like this (as someone who loathes the Metaverse project)
    - Infinitesimus 4y ago
      To clarify, I'm not affiliated with Meta. Just an internet nerd who likes following how organizations think and evolve
nappy-doo 4y ago
Not really. Meta raised 10B (really their first debt ever) in April 2022, and GOOG has like 14B in debt. Google could pay that with less than a quarter's worth of earnings, and I think Meta's not far behind. IMO, the market is overreacting. Both companies look pretty cheap to me.
- nluken 4y ago
  Markets are forward looking. FB's growth numbers don't look great, and if you don't buy into their bet on the Metaverse you might be less inclined to see a bright future for that company.
  - edmundsauto 4y ago
    Markets are forward looking, but people making the decisions are plagued by recency bias and fighting the last battle. No comment on the relative contribution of different incentives, but being "forward looking" doesn't mean "correct" and it can also include an overreaction based on recent data points.
- acchow 4y ago
  If FB revenue stops growing, markets are going to keep punishing it. A PER of 11 won’t feel cheap with 0% growth

by tempsy 4y ago

dafty4 4y ago

The stock price dive at Meta is pretty clearly due to the $10B hit from Apple’s Do Not Track Feature. Meta should make a free Android phone that allows tracking.

tempsy 4y ago
Nasdaq is down 30%. Clearly macro factors like rates and inflation and recessionary pressures are putting pressure on rate sensitive companies generally speaking. You can’t just say it’s ad tracking when dozens of mid and large cap tech stocks are down 30-80% ytd
- paganel 4y ago
  > Clearly macro factors like rates and inflation To quote from the latest Economist [1]: > This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does. and > In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order. Sorry for the long quotes, it was the best I could do, I highly recommend that article in its entirety. [1] https://archive.ph/9GbfH https://archive.ph/9GbfH
  - subsubzero 4y ago
    Thanks for this, its confusing for many as to why growth companies(low/no-profit) are getting hit so hard due to rising interest rates and these quotes and the article linked explain the reasoning very well.
  - robocat 4y ago
    The NPV values didn’t look weird enough, but I got the same results from: https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php https://www.calculatorsoup.com/calculators/financial/net-pre... — Values used: Interest Rate = %5, Compounding = 1 times per Period, Line 0 = $0, Line 1 = 5000 periods of $100. However, I think the economist column/article misses some important points: 1: There is a stereotype that corporations only look at the next quarter’s earnings. The article argues the opposite, that corporations are long term focused. The article needs to address that point. 2: Stocks and dividends should be inflation proof (with some assumptions, such as revenues increase with inflation). 3. The article doesn’t seem to mention bonds, even though it talks about constant $ returns. What? The most interesting part of the article for me was “The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears.” [Slight edits]
stocknoob 4y ago
Do not track is an easy scapegoat, but I think the rise of TikTok is a larger factor. Meta lost users.
- badwolf 4y ago
  I think this, along with a slew of other factors as well. Meta pivoting to burn money on a VR universe that nobody actually seems to want. Meta burning FB users by constantly altering their FB news feed, making it less and less a place for friends, and more a place to see endless reposted memes and ads for drop-ship products and stolen IP tshirts. Meta burning Instagram users by trying to force everyone's favorite photo-sharing app to be a shittier version of TikTok, as well as the above constant feed refactors...
- disgruntledphd2 4y ago
  It's definitely the ATT changes, literally cratered all their direct response ads on iOS (i.e. rich people). TikTok is definitely a concern but turning off the money pump is a much, much bigger one.
- retinaros 4y ago
  if this is tiktok they shouldnt worry for long i bet it will be banned before end of year
Infinitesimus 4y ago
Oh but they did! Meta leadership has always anticipated this risk. The problem is that they have not been able to fully mitigate it. Facebook Phone (rebranded HTC) was released in 2013 https://en.wikipedia.org/wiki/HTC_First https://en.wikipedia.org/wiki/HTC_First but had poor sales. The metaverse is their next play to build a world where they are a bit more shielded from Apple/Google/Microsoft's hardware influence. Pivoting a large business is really hard.
- mistrial9 4y ago
  I appreciate when people inside FB/Meta speak directly like this (as someone who loathes the Metaverse project)
  - Infinitesimus 4y ago
    To clarify, I'm not affiliated with Meta. Just an internet nerd who likes following how organizations think and evolve

nappy-doo 4y ago

Not really. Meta raised 10B (really their first debt ever) in April 2022, and GOOG has like 14B in debt. Google could pay that with less than a quarter's worth of earnings, and I think Meta's not far behind. IMO, the market is overreacting. Both companies look pretty cheap to me.

nluken 4y ago
Markets are forward looking. FB's growth numbers don't look great, and if you don't buy into their bet on the Metaverse you might be less inclined to see a bright future for that company.
- edmundsauto 4y ago
  Markets are forward looking, but people making the decisions are plagued by recency bias and fighting the last battle. No comment on the relative contribution of different incentives, but being "forward looking" doesn't mean "correct" and it can also include an overreaction based on recent data points.
acchow 4y ago
If FB revenue stops growing, markets are going to keep punishing it. A PER of 11 won’t feel cheap with 0% growth