Meta Stock Replaces Facebook Stock

Facebook changed its name to Meta. But for investors in the company, does this move make sense? Meta stock is one of my largest investments.

A lot has changed since Facebook got its start in 2004… 

Mark Zuckerberg has taken the company from zero to over $85 billion in revenue in 2020. And it continues to grow with over $112 billion in trailing 12-month revenue. That’s impressive growth for its size… 

Facebook and Meta revenue 2010 through 2020, along with 2021 TTM revenue

Facebook reaches over 2.9 billion monthly active users today. In some countries, growth has slowed but the company is improving monetization and expanding into new horizons (pun intended). With the recent Facebook Connect event, Mark announced a name change to Meta. And of course, plenty of people have pointed out this is a PR move. But the main intention is to better align with where he hopes the company is going. 

Current hardware providers such as Apple have a lot of control over Facebook. So, Mark is hoping to own a stake in the next major computing platform. It’s a big bet and Meta is already investing massively into these future technologies. 

Facebook bought Oculus VR for $2.3 billion back in  2014. Since, it’s launched multiple VR headsets and its new Quest 2 headset has outsold all the others combined. Some estimates put the number of sales coming closer to 10 million units. 

When compared to Facebook’s main revenue, this is just a drop in the bucket… but it’s a promising trend. And starting Q4 2021, Facebook will report revenue and operating profit for two separate segments: Family of Apps and Facebook Reality Labs. 

With that insight, we should have a better idea of how Meta’s AR and VR efforts are coming along. 

In the Connect presentations, they also emphasized it’s going to take many years to help build out the metaverse. This is a long-term play and Facebook Reality Labs will reduce overall 2021 operating profit by approximately $10 billion. And Meta expects these investments to increase in the years ahead. 

Of course, this Meta pivot is early stages and might not pay off as expected. At this level of spending, it’s a huge risk for investors. 

One of the featured speakers at Facebook Connect was John Carmack. He’s a well-known video game developer and engineer. He left his role as CTO of Oculus VR in 2019 but has stuck around as a consultant. He was unscripted and candid in his presentations. Here are a few of his comments… 

“I want it to exist. But I have pretty good reason to believe setting out to build the metaverse is not actually the best way to wind up with the metaverse,” 

“But here we are. Mark Zuckerberg has decided that now is the time to build a metaverse,” 

“So enormous wheels are turning and resources are flowing, and effort is definitely going to be made.” 

Based on these and some other comments, Carmack seemed a bit salty with Mark Zuckerberg’s approach to the metaverse. It sounds like he might be kept out of the loop with larger metaverse plans. 

Meta is working on cryptocurrencies and a wide range of other tech that might play nicely with the metaverse. There was talk of NFTs and expansion of digital property rights. 

When I bought Facebook stock back in 2018, I predicted the company valuation would more than double to $1 trillion. That’s already happened and my second prediction was a dividend in the next five years. But with this big push into the metaverse, I doubt we’ll see a dividend anytime soon. And I’m OK with that… 

Meta has some huge technical barriers to overcome to make VR mainstream. But if it happens, that’ll be huge for shareholders going forward. Even in the face of constant criticism, Mark Zuckerberg has a great track record of success. As Facebook’s largest shareholder, he’s putting his money where his mouth is and I believe the potential for AR and VR is huge as well. 

I haven’t owned a VR headset since 2016 and I was impressed with how far it’d come back then. Since, there have been big breakthroughs and with more R&D in the pipeline, I’m excited to say the least. 

My plan is to continue holding Meta stock and if there’s a continued downturn, I might pick up more shares. 

Please let me know if you have any comments or questions down below. And I hope you’ll stick around for more ideas and research. You can follow my most recent content by subscribing to my YouTube channel.

Invest mindfully,

Brian Kehm

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