Is Facebook's Future Bright Without the Metaverse?
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Chapter 1: Financial Insights Post-Metaverse
Facebook's (FB) financial performance suggests that moving away from the Metaverse could yield benefits. Following the media's announcement of the Metaverse's demise in mid-May 2023, Meta’s (FB) revenue began to see an uptick in the quarter concluding on March 31, 2023. In contrast, revenue had previously decreased by 4.47% in the quarter ending December 31, 2022.
Notably, Meta's revenues rose by 6.64% during the quarter ending March 31, 2022. This led to an increase in quarterly revenues from $27.908 billion on March 31, 2022, to $28.645 billion on March 31, 2023. Conversely, revenues peaked at $32.165 billion on December 31, 2022. However, it’s important to note that Meta’s profitability has decreased; operating income fell from $8.524 billion on March 31, 2022, to $7.227 billion on March 31, 2023. Despite this, gross profit did increase, rising from $21.903 billion to $22.537 billion in the same time frame.
Section 1.1: The Demise of the Metaverse
Some argue that the Metaverse was never a genuine concept. However, CEO Mark Zuckerberg had faith in its potential. According to estimates from The Street, Meta’s Reality Labs, responsible for the Metaverse, incurred losses nearing $24 billion over 2021 and 2022.
This video discusses the rise and fall of Facebook, detailing how the Metaverse impacted the company’s trajectory.
Another factor contributing to the Metaverse's decline is Meta's financial strain. The company’s cash and short-term investments diminished from $43.89 billion on March 31, 2022, to $37.439 billion a year later. Additionally, cash flow decreased from $14.076 billion to $13.998 billion during the same period. Meta remains a cash-rich entity, but its liquidity has diminished, prompting concerns from Zuckerberg, who is known for prioritizing cash reserves.
Section 1.2: Assessing Meta's Financial Health
Despite common assumptions, Meta (FB) appears to be in a healthier position than many believe. For instance, its total debt dropped from $14.658 billion on March 31, 2022, to $9.925 billion on March 31, 2023. This indicates that Meta has been actively managing its debts while also investing heavily in the Metaverse, suggesting overall fiscal robustness.
Chapter 2: Meta's Value Proposition
Despite the setbacks with the Metaverse, Meta's intrinsic value continues to grow. For example, its total assets have surged from $164.218 billion on March 31, 2022, to $184.491 billion on March 31, 2023. Furthermore, Meta controls four of the largest social media platforms globally: Facebook, WhatsApp, Instagram, and Facebook Messenger, boasting a staggering 7.889 billion monthly active users as of January 2023.
According to Statista, Facebook alone accounted for 2.958 billion monthly active users, while WhatsApp and Instagram each attracted around two billion users, and Facebook Messenger had 932 million users in January 2023. This expansive user base positions Meta favorably in the market compared to competitors, underscoring its true value beyond speculative ventures like the Metaverse.
This video explains strategies for monetizing within the Metaverse, highlighting opportunities that may arise from its evolution.
Meta is often seen as undervalued at $262.04 per share as of May 26, 2023, with share prices increasing from $191.63 a year prior.
In conclusion, I view Meta (FB) as an exceptional investment opportunity, particularly without the constraints of the Metaverse. For those seeking a promising social media stock, Meta is worth exploring, even without the addition of dividends. My recommendation to Zuckerberg would be to consider reintroducing a dividend and reverting the name back to Facebook. However, even without these changes, Meta remains a compelling investment choice for anyone interested in a robust technology stock that promises growth.
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