Meta Stock Bull Run?, Pre-Earnings Themes, No Drama Llama- v2

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.

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

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

🔥 Reels

• 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

✨ Threads

• 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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