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https://www.marketwatch.com/investing/stock/meta/financials/cash-flow/quarter https://www.marketwatch.com/investing/stock/meta/financials/... People act like M

https://www.marketwatch.com/investing/stock/meta/financials/cash-flow/quarter https://www.marketwatch.com/investing/stock/meta/financials/... People act like Meta is going under because their free cash flow went from $8B to $4B in a year when they've faced headwinds from Apple's new privacy policy and the economy overall. As far as I can tell the company is in perfectly fine financial health. The market is essentially betting that Meta is headed in the wrong direction to increase profits over the near term. I think Zuck might actually agree with them.

kotlin2 4y ago
Companies are valued based on future cash flows. A stable company typically has a P/E ratio of 20. Meta’s is around 10, which is an indication the market believes profits will cut in half and then stabilize.
- voisin 4y ago
  > A stable company typically has a P/E ratio of 20. This depends on interest rates, inflation, relative attractiveness of the industry (concentration, ease of entry, etc).
- bluedevil2k 4y ago
  > the market believes profits will cut in half and then stabilize. This isn’t true. The market believes Meta will still grow, just slower than before. If they believe growth is zero, as you indicate with “stabilize”, their PE ratio will plummet even further.
- type-r 4y ago
  pe ratios tend to be closer to 15 over the long term. some good data here https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
- JumpCrisscross 4y ago
  > stable company typically has a P/E ratio of 20 This is a 5% earnings yield. That's a whopping 99 basis points ahead of the 1-year rate and 103 north of the 6-month [1]. One can adjust for growth [2]. But a neutral 20x multiple is not a fact of nature. [1] https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView https://home.treasury.gov/resource-center/data-chart-center/... [2] https://en.wikipedia.org/wiki/PEG_ratio https://en.wikipedia.org/wiki/PEG_ratio
Cupertino95014 4y ago
Apple pays a dividend. Microsoft pays a dividend. Most mature companies do. When a company has cash that it can't invest as profitably as its shareholders could do on their own, it's obligated to pay it to them as a dividend. It's their money. Of course, Zuckerberg would rather flush it down the toilet and call it "innovation." The stock market is voting No on that.
- nr2x 4y ago
  Yeah the stock market knows fuck all about tech relative to people in SV. I don’t care what their vote is.
  - iwillbenice 4y ago
    Yes but we live in a society.
  - Cupertino95014 4y ago
    The stock market determines what everyone's stock is worth. Other than that: irrelevant.
  - scottLobster 4y ago
    You think people in tech don't invest in the stock market? The knowledge is priced in to some degree
    - roflyear 4y ago
      Probably not active investors
      - Cupertino95014 4y ago
        There are very large funds that focus on tech. And since tech has gotten so big relative to the market, even if a fund doesn't specialize in it, they still have to understand it. Since they have so much money at stake, they have an interest in understanding it. Not doing so will cost them their jobs. "Understanding" is "in the financial sense" of course. They mostly care about the volumes of money going in and out, and expectations for that.
faangiq 4y ago
They have two dying products and nothing in the pipeline. Basically it’s over.

kotlin2 4y ago

Companies are valued based on future cash flows. A stable company typically has a P/E ratio of 20. Meta’s is around 10, which is an indication the market believes profits will cut in half and then stabilize.

voisin 4y ago
> A stable company typically has a P/E ratio of 20. This depends on interest rates, inflation, relative attractiveness of the industry (concentration, ease of entry, etc).
bluedevil2k 4y ago
> the market believes profits will cut in half and then stabilize. This isn’t true. The market believes Meta will still grow, just slower than before. If they believe growth is zero, as you indicate with “stabilize”, their PE ratio will plummet even further.
type-r 4y ago
pe ratios tend to be closer to 15 over the long term. some good data here https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
JumpCrisscross 4y ago
> stable company typically has a P/E ratio of 20 This is a 5% earnings yield. That's a whopping 99 basis points ahead of the 1-year rate and 103 north of the 6-month [1]. One can adjust for growth [2]. But a neutral 20x multiple is not a fact of nature. [1] https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView https://home.treasury.gov/resource-center/data-chart-center/... [2] https://en.wikipedia.org/wiki/PEG_ratio https://en.wikipedia.org/wiki/PEG_ratio

Cupertino95014 4y ago

Apple pays a dividend. Microsoft pays a dividend. Most mature companies do. When a company has cash that it can't invest as profitably as its shareholders could do on their own, it's obligated to pay it to them as a dividend. It's their money. Of course, Zuckerberg would rather flush it down the toilet and call it "innovation." The stock market is voting No on that.

nr2x 4y ago
Yeah the stock market knows fuck all about tech relative to people in SV. I don’t care what their vote is.
- iwillbenice 4y ago
  Yes but we live in a society.
- Cupertino95014 4y ago
  The stock market determines what everyone's stock is worth. Other than that: irrelevant.
- scottLobster 4y ago
  You think people in tech don't invest in the stock market? The knowledge is priced in to some degree
  - roflyear 4y ago
    Probably not active investors
    - Cupertino95014 4y ago
      There are very large funds that focus on tech. And since tech has gotten so big relative to the market, even if a fund doesn't specialize in it, they still have to understand it. Since they have so much money at stake, they have an interest in understanding it. Not doing so will cost them their jobs. "Understanding" is "in the financial sense" of course. They mostly care about the volumes of money going in and out, and expectations for that.

faangiq 4y ago

They have two dying products and nothing in the pipeline. Basically it’s over.