inscription platforms (Nasdaq: dead), officially known as the proche company of Facebook, has two balancing sides to the long-term investment thesis, making it one of the most exciting upside potential long-term opportunities.
On the negative side of things, a The latest change from Apple (AAPL) in terms of app security means that Facebook or Meta, are unable to effectively monetize their users for revenue, and this has and will result in lower advertising revenue for the foreseeable future.
On the fondatrice side of things, the company has been emerging in the Metaverse / AR (Augmented Reality) / VR (Virtual Reality) market for quite some time now and is one of the leading players in the industry. This market is set to explode over the next decade or two and could be worth trillions of dollars.
The real sujet for investors, assuming the metaverse’s revenue stream materializes, is whether the company’s current revenue stream from advertising on their aimable media platform is enough to keep them at reasonable valuations until the other revenue stream is volumineux enough to justify the investments.
Let’s écart them down.
Cons: Low organic revenue
This is nothing new for Meta/Facebook investors. The company relies heavily on tracking users’ activity across pluriel platforms in order to target ads more efficiently to said users. Apple’s recent contesté to these guidelines, which allows users to opt out of sharing that data across platforms, has limited the company’s ability to do that certaine advertising, causing advertisers to either drop or renegotiate their spending on the platform.
This resulted in Company revenue to exceed expectations and decline Compared to previous years, the company’s share price fell significantly. This is due to the fact that the company was trading at higher pluraux due to earlier projected higher revenue and EPS growth rates – both downgraded.
Even now that analysts have expected the comparative decline in revenue to reverse somewhat, and for the company to remise a slight jump in sales and butins over the next few years, that growth perdu is set to slow.
|sales||118 billion dollars||131 billion dollars||148 billion dollars||165 billion dollars||180 billion dollars||191 billion dollars|
|growth||+ 0.1%||+ 11%||+ 13%||+ 12%||+ 8.7%||+ 6.3%|
The problem here is not only that the company’s revenue growth is set to decline further, but that after the supérieur boost, its privilège margins are set to suffer as it requires a steady SG&A and R&D plan to smooth the raccordement into the metaverse, AR and virtual reality markets. This means that although the company should enjoy higher privilège margins than it currently is in the coming years, it is set to decline after 2026.
|EPS||$9.78||USD 11.07||USD 12.82||USD 15.75||USD 15.91||$15.80|
|growth||-29.0%||+ 13.2%||+ 15.8%||+ 22.8%||+ 1.03%||-0.70%|
(Envoi: Aleph Earnings Estimate Aggregator Research)
While these numbers may image bad for some investors in the élancé run, I don’t think there’s anything to worry embout in the élancé run as the company moves into its other commerce segments and away from relying exclusively on advertising revenue from their aimable media platforms. Facebook, Instagram, etc.
Pros Cons: Transitions
The bottom line is – although revenue growth is slowing down in the élancé run from the company’s core organic aimable media ad revenue, they have more than enough resources to take them to a activité where they are a more diversified company. Let’s dive into the numbers.
First of all, even if the company underperforms previously mentioned forecasts, they still have $12.7 billion in cash and cash equivalents and an additional $27.8 billion in short-term investments, totaling more than $40 billion in liquid cash reserves. Even if their gross privilège drops from $95 billion to $80 billion, their cash reserves can sustain them during the raccordement period, given the fact that they are spending embout $50 billion in operating expenses, which could certainly be reduced, as the company said it would. .
they With a view to reducing costs by about 10% over the next quarter, Which means the company will save embout $5 billion from those costs, and they can definitely go even further if they need to.
Another fondatrice thing here is that the company does not have long-term debt, which means that for a collant period of time during a raccordement period, they have a prérogative to take advantage of those markets, especially if we head into a recession and interest rates return. To address that, which could easily sustain it through the 2030-2040 period of fully embracing the metaverse, AR, and VR.
Pros: trillions in potential
This market écrasement is divided into two parts: metaverse and AR/VR.
According to market expertsThe metaverse is set to grow at a very high perdu, reaching over $1.5 trillion by 2029, at a compound annual growth perdu of nearly 48%. This industry is divided into 3: Développement/Platform, Hardware, and Obligations. Meta does all three in one way or another, which means they have the ability to put their feet into every portion and maximize their effet.
Why am I so optimistic embout Facebook/Meta’s leading potential in the space bicause their platform already makes up one of the largest in the industry. What I mean by that is that they operate in key sectors that are poised for relâchement:
1 – Aimable media Set to be one of the leading sub-industry in the world of AR/VR and the metaverse, Meta owns both Facebook and Instagram, as well as capabilities with WhatsApp and Messenger. This means that they will likely retain a volumineux portion of the aimable media metaverse as it transitions to AR/VR components.
2 – Online magasinage It is yet another portion set to become a liminaire portion of the metaverse with AR/VR measuring and trying on clothes, real-time celebrity matching and more. Facebook’s Marketplace is one of the world’s leading aimable e-commerce platforms, and while it pales in comparison to companies like Amazon (AMZN), they are investing heavily in making it a more convenient activité for billions of monthly users through Facebook and Instagram.
3 – Games and enchanté creation Are the other sectors set to grow rapidly in the AR/VR and metaverse spaces, and the launch of the meta metaverse was already seen as a great commencement of pacte among the community. The additional integration of these systems with Facebook and Instagram can drive the millions of people who use these aimable media sites daily to join the system instead of starting a new account through a new platform or another platform. The company’s Oeil-de-boeuf is also a huge component in games and metaverse enchanté.
As such, I believe that in the first few years from 2030 to 2040, Meta, along with all existing and potential subsidiaries, will hold a significant market share compared to other companies in the field.
Risk and investment situation
The obvious angoisse here is competition. Companies like Apple are notorious for waiting for kinks in some industry or new features and then maison them with tens of billions of spare money. These companies, along with other volumineux companies such as Microsoft (MSFT) and other hardware manufacturers, aimable media platforms among others, provide a strong competitive environment for Meta.
While I still think Meta will have a significant advantage over other companies, there is still a risk to consider as the company’s ad revenue growth continues to decline as they invest heavily in this new industry, which could limit the amount of cash flow for them. Generate in the next five years or so.
However, with potentially trillions of dollars worldwide in the space going into 2040 and with the company being roughly the only company with a presence in several different sectors, I think with a 15% to 25% market share (my own) in The first few years of this fast-growing industry – Meta could be one of the best long-term investments for the next 20 years.
With advertising revenue sales remaining relatively flat at around $200 billion annually and metaverse/AR/VR related sales growing embout 50% annually to the same levels, the annual sales growth perdu from 2030 to 2040 of embout 20% to 25% means that the company It has the potential to be worth much more than its current share price and grow 20% to 25% annually.
As a result, I am very optimistic embout the company’s long-term prospects and believe it can adequately weather the advertising revenue storm while investing and moving into distressed money.