Facebook is doing great. To put things in perspective:
- On average, they net around 35 billion a year. With a valuation (MC) of 887 billion.
- On average, Google net around 51 billion a year. With a valuation of 1.8 trillion.
Facebook is making 68% as much as Google, with its valuation at less than half the price. And over the past 4-5 years Facebook's revenue has grown on average 32%/year, while Google grows 23%/year.
Really undervalued company IMO.
And their revenue did grow. They grew year-over-year. Just missed their target by 3%.
The problem is of course, that Facebook is directly threatened by TikTok, while Google has a much stronger hold on its market segments. Google could continue growing, while Facebook actually shrinks.
I've never really understood this MBA mentality because growth must stop at some point. There are only so many humans on earth. The expectation that a company can grow forever is impossible, at least until we find an alien planet with a population willing to sign up for Facebook.
Right, of course. The claim wasn't "all companies must continue growing forever or they are bad companies / their stock will crash". It was rather "Facebook in particular's current valuation is based on investors predicting it will continue to grow".
When (not if) Facebook stops growing, it will be worth _something_. Owning its stock is a bet on what that number is, and the stock price reflects the market's collective estimate.
The stock market price today is based on the value people EXPECT the company to have at some point, not the one it has. If people expected it to grow much more, and it doesn't, the value falls to the level it possibly should've had in the first place.
It's not MBA mentality, it's stock investors mentality. I don't think Zuckerberg or any other executive is out there buying FB shares at $320. It's outsiders gambling on the continued growth.
Share buybacks usually indicate the company can't figure out what to do with their cash stockpile, and are doing a tax-advantaged dividend (it effectively gives the money to shareholders, but they don't have to incur a tax hit).
It could mean they're really certain it'll be worth more later, or it (more likely) could mean they ran out of ideas and are trying to shore up the stock price, too.
Their users growth has been lowering towards 0 for a few years and it's expected that users will eventually shrink. It's just symbolic when you pass the tipping point (although this might be local and not be the definitive tipping point).
Look at the numbers alphabet and apple posted the last few days. Huge growth.
Facebook is not only growing but much worse, shrinking.
I’ve been bullish on FB from the ipo date but this seems like the beginning of the end unless the meta verse is out of this world