2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 200
Meta Platforms, Inc. (NASDAQ:META) is a Menlo Park, California-based diversified technology conglomerate that owns notable social media and instant messaging platforms like Facebook, Instagram, and WhatsApp.
The stock of Meta Platforms, Inc. (NASDAQ:META) is down over 50% YTD as the company is trying to combat growth-related concerns, high inflation, and rising interest rates. The company is transitioning towards augmented reality and metaverse during all this uncertainty.
On July 19, Stephen Ju at Credit Suisse slashed the target price for Meta Platforms, Inc. (NASDAQ:META) from $273 to $245 and maintained an Outperform rating on the stock before its Q2 2022 results. The analyst anticipates Meta Platforms, Inc. (NASDAQ:META) to report in-line Q2 2022 results and expects the growth outlook for the second half of 2022 to be impacted by broader macroeconomic concerns. Meta Platforms, Inc. (NASDAQ:META) is shifting its resources from the News Tab and newsletter platform toward a strong Creator economy. This move is made to compete with TikTok, which is gaining market share in the space.
Here’s what Moon Capital Management said about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2022 investor letter:
“For most of the past decade, Meta’s share price has marched almost lockstep with its meteoric rise in earnings and free cash flow. That was until almost a year ago. Since August 2021, Meta shares have dropped more than 50 percent, while its free cash flow has increased 60 percent.
While Meta is facing certain headwinds related to changes in Apple’s latest operating system release (iOS 14’s optional identifier for advertisers (IDFA) blocking) that impact Meta’s ability to track and thus effectively target its user base, we believe the company will be able to effectively mitigate these changes. Meta estimates that these changes will result in a $10 billion headwind in 2022. To the extent that the company solves the IDFA problem over time, improvements in returns on advertising spending could result in a partially recovery of revenue dollars that creates a future tailwind.
Meta is also spending aggressively on augmented and virtual reality through the company’s Reality Labs division. Meta’s vision is that, over the next decade, the expansion of virtual reality may create the next major computing platform after mobile. The company is investing heavily in this area, dedicating more than $10 billion per year in the form of operating expenses running through the income statement. While the company is currently being penalized for these investments, we think it is more appropriate to view these costs as free options, given that the plug can be pulled at any time if the investments don’t develop into meaningful revenue contributors.
Meta’s core advertising business is clearly entering a more mature phase of its life cycle – or, at least, it is no longer the tiny newcomer in the advertising industry. Meta is now a $120 billion-a-year business, more than ten times its size in 2010. Starting from a base of less than $2 billion in 2010, Meta’s revenues have grown more than 40 percent annually. While it is easier to produce 40 percent annual revenue gains with a $2 billion business than with a $120 billion one, we expect that Meta will continue to siphon ad spending from traditional broad-based, “shotgun approach” legacy ad platforms, such as newspaper, magazine, radio and television.”
Beech Hill Partners was the leading hedge fund investor in Meta Platforms, Inc. (NASDAQ:META) during Q2 2022.
