⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $META 🧘🏽‍♂️

•NTM P/E Ratio: 26.11x
•5-Year Mean: 22.49x

•NTM FCF Yield: 3.05%
•5-Year Mean: 3.67%

As you can see, $META appears to be slightly overvalued

Going forward, investors can expect to receive ~14% LESS in earnings per share & ~16% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $META is a quality business

BALANCE SHEET✅
•Cash & Equivalents: $65.40B
•Long-Term Debt: $18.39B

$META has an excellent balance sheet, an AA- S&P Credit Rating & 159x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 26.0%
•2020: 23.5%
•2021: 33.7%
•2022: 22.0%
•2023: 26.3%
•LTM: 31.7%

RETURN ON EQUITY✅
•2019: 20.0%
•2020: 25.4%
•2021: 31.1%
•2022: 18.5%
•2023: 28.0%
•LTM: 35.4%

$META has great return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2018: $55.84B
•2023: $134.90B
•CAGR: 19.29%

FREE CASH FLOW✅
•2018: $15.36B
•2023: $43.85B
•CAGR: 23.34%

NORMALIZED EPS✅
•2018: $7.57
•2023: $14.87
•CAGR: 14.45%

SHARE BUYBACKS✅
•2018 Shares Outstanding: 2.92B
•LTM Shares Outstanding: 2.64B

By reducing its shares outstanding ~9.5%, $META increased its EPS by ~10.5% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 81.5%
•LTM Operating Margins: 41.2%
•LTM Net Income Margins: 34.3%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~14% MORE in EPS & ~16% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $META has to grow earnings at a 13.06% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (13.06%) required growth rate:

2024E: $21.42 (44.9% YoY) *FY Dec

2025E: $24.62 (14.9% YoY)
2026E: $28.35 (15.2% YoY)

$META has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $META ends 2026 with $28.35 in EPS & see its CAGR potential assuming different multiples

26x P/E: $639.84💵 … ~10.9% CAGR

25x P/E: $639.84💵 … ~8.9% CAGR

24x P/E: $639.84💵 … ~6.9% CAGR

23x P/E: $613.18💵 … ~4.8% CAGR

22x P/E: $586.52💵 … ~2.7% CAGR

As you can see, $META appears to have double-digit CAGR potential if we assume >26x earnings, a multiple above its 5-year average (22.49x), however 26x is a multiple that’s justified given its mid-teens earnings growth rate, balance sheet, visionary CEO & investments in AI & LLMs

As I’ve mentioned before: “… the increased investment in future growth and necessary Al development, which has the potential to lead to better growth prospects, should be viewed with a bullish tone rather than a bearish one” — (which can lead to a sustainable re-rating over the next few years)

Mark Zuckerberg continues to execute exceptionally well, as he has always done

Today at $593💵 $META appears to be fairly valued, those buying today won’t have a margin of safety and will be relying heavily on estimates being met & revised upwards

#stocks #investing
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𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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Google kicked off Big Tech earnings!

☢️ AI investments
🚖 Waymo expansion
🔎 Search competition
☁️ Cloud reacceleration
▶️ YouTube market share

Let's visualize the quarter!👇 $GOOG
https://t.co/EGnmUnPeC8
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Spending a few days in Bristol during the half term. I wish Concorde was still running. From London to NYC in just 3 hrs 20 min! https://t.co/DrA5cex3Fe
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⁠Stock Analysis Compilation
Munro on Contellation Energy $CEG US

Thesis: Constellation Energy's nuclear-powered, carbon-free electricity supply positions it as a vital player in the energy-hungry data center industry, with earnings potential set to triple in six years.

(Extract from their Q3 letter) https://t.co/oeg4fAqKrA
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⁠Quiver Quantitative
BREAKING: Representative Green just disclosed the sale of another ~$200K of NGL stock.

He bought massive amounts of the stock before it rose almost 100%.

Then he sold before it came back down.

Incredible timing: https://t.co/APbmFj5yM9
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⁠Quiver Quantitative
RT @InsiderRadar: $NRDS stock is up 32% this morning, off a strong earnings report.

Great timing on last week's insider purchase, which was the first at the company in over a year. https://t.co/kdIZg7r2eL

Topline Capital Management, who has >10% ownership of $NRDS, just reported the purchase of ~$5m of the company's stock.

This is the first insider purchase that has been reported at NerdWallet in over a year. https://t.co/YPbxNRSAjR - Insider Radar
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⁠Dimitry Nakhla | Babylon Capital®
$SMCI

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

— Charlie Munger 🗣️

#stocks #investing - Dimitry Nakhla | Babylon Capital®
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⁠Investing visuals
Alphabet $GOOGL earnings review 👇🔍

Highlights ✨
🔹Beat revenue, EBITDA & EPS estimates
🔹Cloud revenue growth accelerated from 29% to 35%
🔹Cloud operating margin increased to 17%

Very solid quarter!
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