Meta Stock Bull Run?, Pre-Earnings Themes, No Drama Llama- v2
Why analysts are loving the stock this cycle
Ahoy Metamates! 🚢 🏴☠️
I refuse to look at any more shirtless photos of Mark or Elon so this week I will NOT be covering any updates on their supposed UFC style cage match. But there’s some other good content to warm you up for Earnings :)
🆕 The TLDR This Week
Meta posted 200 job vacancies in generative AI from the beginning of 2023 ( vs Microsoft 54). - source: Marketline
Meta owns a federal trademark registered in 2019 covering a blue-and-white letter "X" for fields including software and social media. Fun times to ensue for Elon and Mark.
Facebook to aggregate Reels, long form & live videos in new 'Video' tab
The Canadian government withholds advertising to protest Meta link
The Meta Stock Bull Run is A Mirage
It’s a few nights before earnings and options activity is a little nutty right now, with most betting the stock will go up (buying calls). Still, premiums continue to be a little salty. Yeah, this is not that it seems.
Source: Refinitiv Data, Jul 24
My guess is that this is not a bull run. It’s very likely to be existing Meta stockholders playing the covered call game: the call options price for early August is hovering around $312 and the price today closed at $291. In theory, if you already own a bunch of shares you could sell the August price short and get an immediate ~$10 premium.
Reminder: don’t try this at home if you’re a Meta employee because derivative trading is a no go in most of y’all’s employment contracts. Also, this is not financial advice.
Analysts are Love-Bombing Meta Before Earnings
Every analyst who shat on Meta in November
Google is now on the chopping block- and Meta is officially out of the woods with most analysts. Numbers going into the call are looking solid, according to JP Morgan’s Doug Anmuth.
Metrics to watch:
Meta shares are up 163% YT ( vs Snap +25%, PINS +9%, GOOG +38%, NFLX +62%, & AMZN +61%)
Bulls are looking for mid-teens% top-line growth
CTM ads contributing ~$13B in revenue in 2023
Meta Ad spend up 4.7% YOY in 2Q, up from .5% y/y in 1Q Deutche Bank ( vs TikTok +18% , SNAP + 4.7%, Amazon +20.4%, Spotify +14%)
Key themes analysts are commenting on pre-earnings
Expected to be revenue neutral by next quarter
Time spent on IG +24% since Reels launched (~7.5% CAGR) - JPMC
Could drive $9B+ in aggregate revenue in 2024
🎆 Click to Message (CTM)
Focused on developing markets like Brazil, where WhatsApp is prevalent
Meta quietly testing AI chatbots within IG Direct Messaging
CTM ads contributing ~$13B in revenue in 2023 & $18B+ in 2024 - JPMC
100M+ sign-ups in the first 5 days
Meta has taken 8-10 months to monetize new bets in the past
No one expects to see key metrics until early spring next year
There’s No Drama With The Llama
The AI boom is coming at a perfect time for Meta, who’s been a leader in this space for a long time. Notably, stock analysts who were skeptical of Meta’s hardware spend last year ( I’m looking at you, Morgan Stanley) have now been so far intellectually outpaced that stock reports read “AI GOOD”.
Or, simply put, F the year of efficiency as long as it’s “for AI”. Which is pretty much what’s happening - Meta has opened 200 new roles for generative AI along this year, 4x more than Microsoft.
Where does Llama come in?
Llama- v2 is not nearly as advanced as it’s kissing cousin GPT-4. It may feel like it’s a big gap to close but that’s not so true. Looking back to earlier this year, a week out of the gate, Llama - v2’s predecessor was already gaining on its competition.
The race right now has nothing to do with feature parity and everything to do with tool standardization. It’s still early days - Meta’s goal is to get as many developers using Llama as possible and as much data to train on as it can. If it can become a default utility, the value to Meta is immeasurable.
Developer Conference Coming up: Meta Connect, September 27-28
Next up: Earnings is this week and analyst reports will start trickling in shortly after. Expect the super detailed earnings issue to drop early next week.
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