cameronfen Posted March 18, 2019 Share Posted March 18, 2019 ^^ I guess what I meant is I would say the low end of your probility that FB will be broken up is probably near my high end. Link to comment Share on other sites More sharing options...
Packer16 Posted March 18, 2019 Share Posted March 18, 2019 Given the large range of probabilities, I do not think the actual number is as important as the direction. If the future plays out with more market dominance & more conflicts, then the break-up scenario will be more likely & IMO limit FB's upside. Packer Link to comment Share on other sites More sharing options...
Read the Footnotes Posted March 18, 2019 Share Posted March 18, 2019 To be clear at this point I do not think FB will be broken up but I think the way to think about this is in probabilities. The scenario for break-up has facts supporting it, namely, the increase in CPMs and the purchasing of competitors to reduce competition. The uncertainty today is how will FB perform going forward. If it continues to do better & its market power grows, break-up & anti-trust will be in its future. Since this how the US has dealt with these issues in the past. If CPMs decline & the market becomes more competitive then FB will remain unchanged. The other aspect about FB versus Amazon is that FB is playing in sandboxes outside of commerce like politics which a social network by nature is a pert of. This increases FB visibility & power in area that puts it in opposition to politicians, a losing proposition IMO. I also have a question if the FB model of owning the social network versus being a technology provider is sustainable given the scope of a social network is larger than commerce. This is why FB is in the news & will continue to be as it is more than technology provider. Packer Bingo! In addition to the risk of anti-trust attention or legislative risks, FB doesn't have to be broken up in order for the business model to have to change. FB and others have undoubtedly faced recent challenges to their business models that the general public is not privy to. Governments around the world must be increasingly interested in what these businesses do for national security reasons. Consumers are also becoming more concerned about their practices. Assigning a probably to any one possible event such as a break up is very difficult. Making estimates of value destruction given these changes in probabilities is even more challenging. As Packer is implying, these risks do not seem to be discussed widely or reflected in the price. If you were going to approach the situation from a naive perspective, it would probably be better to invest when the risks seem generally overstated than when risks are generally ignored. Link to comment Share on other sites More sharing options...
vinod1 Posted March 18, 2019 Share Posted March 18, 2019 Purely and only from an Anti-Trust perspective, I think you guys are scaring each other silly. :) There are three major anti-trust Federal laws 1. Clayton Act 2. Sherman Antitrust Act 3. Federal Trade Commission Act I am not a lawyer and have limited understanding of law. Even so, I do not see anything in any of these laws that the Government could use against Facebook to break it up. As I read up on these laws, the thing that it always seem to boil down to is: Are the consumers paying more money than they should? I think the framers of these laws did not imagine the Facebooks and Google's of this world. They can come up with new laws of course. But within existing laws I do not think they have much to stand on against FB. Again purely from anti-trust perspective. Vinod Link to comment Share on other sites More sharing options...
Cigarbutt Posted March 18, 2019 Share Posted March 18, 2019 ^In the previous era when concentration of economic power was on the way up and when so-called inapplicable laws were set up, it was felt by some that further concentration was simply inevitable. 15 years ago, Facebook was basically unknown, just like Louis Brandeis in the 1880's. Food for thought concerning the consumer welfare standard: https://www.theverge.com/2018/9/4/17816572/tim-wu-facebook-regulation-interview-curse-of-bigness-antitrust https://www.ft.com/content/3c99583e-e27b-11e8-a6e5-792428919cee Link to comment Share on other sites More sharing options...
merkhet Posted March 18, 2019 Share Posted March 18, 2019 Purely and only from an Anti-Trust perspective, I think you guys are scaring each other silly. :) There are three major anti-trust Federal laws 1. Clayton Act 2. Sherman Antitrust Act 3. Federal Trade Commission Act I am not a lawyer and have limited understanding of law. Even so, I do not see anything in any of these laws that the Government could use against Facebook to break it up. As I read up on these laws, the thing that it always seem to boil down to is: Are the consumers paying more money than they should? I think the framers of these laws did not imagine the Facebooks and Google's of this world. They can come up with new laws of course. But within existing laws I do not think they have much to stand on against FB. Again purely from anti-trust perspective. Vinod I would take a quick read over Lina Khan's journal article. (https://www.yalelawjournal.org/note/amazons-antitrust-paradox) You're right that the past 30 years have focused on the consumer welfare standard as a heuristic for antitrust, but there is still a ton of precedent for a more Europe-like focus on competition. Whether we shift our antitrust review back to that direction though... ¯\_(ツ)_/¯ Link to comment Share on other sites More sharing options...
glorysk87 Posted March 18, 2019 Share Posted March 18, 2019 You use your Android phone (GOOG), boot up your Chrome browser (GOOG), to search for a new restaurant in google search (GOOG), read the reviews and get directions on google maps (GOOG), email your friends to meet you there on gmail (GOOG) and a self-driving Waymo car picks you up to bring you there (GOOG) and a buddy even books a flight to come join you from google flights (GOOG). All integrated with the google ad engine, which is >2x the size of Facebook's. I am not sure which is actually more vulnerable, but I think that it should be Google. There's a key factor here that you're neglecting to mention. Namely that CPC/CPM rates on Facebook's platforms have seen an astronomical and persistent increase for years now. Conversely, CPC's on Google Sites are running *down* 20% to 30% YoY. Hard to make the argument that Google is flexing monopolistic pricing power when their core product is getting cheaper and cheaper for their customers while being used substantially more (paid clicks/volumes up >60% YoY). Link to comment Share on other sites More sharing options...
vinod1 Posted March 18, 2019 Share Posted March 18, 2019 Cigarbutt, merkhet - Thanks for the links! Link to comment Share on other sites More sharing options...
Spekulatius Posted March 18, 2019 Share Posted March 18, 2019 To be clear at this point I do not think FB will be broken up but I think the way to think about this is in probabilities. The scenario for break-up has facts supporting it, namely, the increase in CPMs and the purchasing of competitors to reduce competition. The uncertainty today is how will FB perform going forward. If it continues to do better & its market power grows, break-up & anti-trust will be in its future. Since this how the US has dealt with these issues in the past. If CPMs decline & the market becomes more competitive then FB will remain unchanged. The other aspect about FB versus Amazon is that FB is playing in sandboxes outside of commerce like politics which a social network by nature is a pert of. This increases FB visibility & power in area that puts it in opposition to politicians, a losing proposition IMO. I also have a question if the FB model of owning the social network versus being a technology provider is sustainable given the scope of a social network is larger than commerce. This is why FB is in the news & will continue to be as it is more than technology provider. Packer The market is not very good at discounting political risk, imo, which avails us great investing or trading opportunities. The innuendo of negative headlines pushed the share price of FB in the $120 an change only to go up to $170 a few month later. I hope to get another bite in the same Apple and would be happy to buy FB again at prices around the recent lows. As long as advertisers stock with FB, the polical risk is somewhat secondary. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted March 19, 2019 Share Posted March 19, 2019 You use your Android phone (GOOG), boot up your Chrome browser (GOOG), to search for a new restaurant in google search (GOOG), read the reviews and get directions on google maps (GOOG), email your friends to meet you there on gmail (GOOG) and a self-driving Waymo car picks you up to bring you there (GOOG) and a buddy even books a flight to come join you from google flights (GOOG). All integrated with the google ad engine, which is >2x the size of Facebook's. I am not sure which is actually more vulnerable, but I think that it should be Google. There's a key factor here that you're neglecting to mention. Namely that CPC/CPM rates on Facebook's platforms have seen an astronomical and persistent increase for years now. Conversely, CPC's on Google Sites are running *down* 20% to 30% YoY. Hard to make the argument that Google is flexing monopolistic pricing power when their core product is getting cheaper and cheaper for their customers while being used substantially more (paid clicks/volumes up >60% YoY). How can FB control ad auction prices? Unless they are manipulating the auctions, the price paid by advertisers is their own choice. In addition, FB has increased their ad inventory during the last few years. I suppose you could argue they should've increased it further but I'd think that would be tough to show. I'd also argue that FB making it easier for incumbents to be elected will actually help them avoid regulations (since incumbents set laws). That's not an overly critical point and reasonable minds could certainly differ. I'd love to see anti-trust but I don't see how it applies to FB. I think a tax on social media ad revenues is more likely but I'm guessing like others. https://www.opensecrets.org/pacs/lookup2.php?cycle=2018&strID=C00502906 https://www.opensecrets.org/orgs/toprecips.php?id=D000033563&type=P&sort=A&cycle=2016 For the most part, FB overwhelmingly spends on people who already set laws and runs a website that materially helps those folks win future elections again. Non-incumbents win elections by innovating on FB. I ultimately think FB will go unscathed for those reasons. Edit: Worth adding that my opinion isn't supported by this morning's letter from the chairman of the anti-trust committee. https://cicilline.house.gov/sites/cicilline.house.gov/files/documents/Facebook_FTC.pdf Link to comment Share on other sites More sharing options...
Liberty Posted April 16, 2019 Share Posted April 16, 2019 https://www.wired.com/story/facebook-mark-zuckerberg-15-months-of-fresh-hell/ Link to comment Share on other sites More sharing options...
gjangal Posted April 24, 2019 Share Posted April 24, 2019 https://www.sec.gov/Archives/edgar/data/1326801/000132680119000035/fb-03312019xex991.htm One time fine of 3B, revenues still growing 26% Link to comment Share on other sites More sharing options...
Jerry Capital Posted April 24, 2019 Share Posted April 24, 2019 *30% constant currency DAU/MAU stable ARPU healthy growth worldwide Will lap YoY capex explosion soon. Get the 2020 US election right and then it's up and to the right for a while with this one. Link to comment Share on other sites More sharing options...
MrB Posted April 25, 2019 Share Posted April 25, 2019 Also seems to be lame bashing FB these days. Media has moved on...what's new. Link to comment Share on other sites More sharing options...
Castanza Posted May 9, 2019 Share Posted May 9, 2019 Opinions on Chris Hughes (FB co-founder) calling for FB to be broken up? Former Twitter COO Ali Rowghani agrees. https://www.nytimes.com/2019/05/09/opinion/sunday/chris-hughes-facebook-zuckerberg.html Link to comment Share on other sites More sharing options...
Liberty Posted June 13, 2019 Share Posted June 13, 2019 https://www.wsj.com/articles/facebooks-new-cryptocurrency-gets-big-backers-11560463312 Link to comment Share on other sites More sharing options...
Liberty Posted June 25, 2019 Share Posted June 25, 2019 https://stratechery.com/2019/facebook-libra-and-the-long-game/ Link to comment Share on other sites More sharing options...
Liberty Posted July 9, 2019 Share Posted July 9, 2019 John Huber was on a podcast discussing FB recently: http://sabercapitalmgt.com/a-discussion-on-facebook/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted July 23, 2019 Share Posted July 23, 2019 DOJ announces broad antitrust review of Big Tech, pushing down shares of Alphabet, Facebook and Amazon https://www.cnbc.com/2019/07/23/doj-reportedly-to-open-broad-antitrust-review-of-big-tech-tech-stocks-dip.html Link to comment Share on other sites More sharing options...
decko Posted January 30, 2020 Share Posted January 30, 2020 What are peoples thoughts on paying 21X FCF to Enterprise for FB? High for myself and maybe for others, but when you consider profit margins 35% plus, Revs 19% ( and probably stabilizing similar to google 10 years ago), a year stated by mgt that expenses would be high (might stabilize ongoing=higher higher earnings), election year, etc.. Users still growing, $ per user growing, and a good runway for potential new products or services. Thoughts? Link to comment Share on other sites More sharing options...
Jurgis Posted January 30, 2020 Share Posted January 30, 2020 What are peoples thoughts on paying 21X FCF to Enterprise for FB? High for myself and maybe for others, but when you consider profit margins 35% plus, Revs 19% ( and probably stabilizing similar to google 10 years ago), a year stated by mgt that expenses would be high (might stabilize ongoing=higher higher earnings), election year, etc.. Users still growing, $ per user growing, and a good runway for potential new products or services. Thoughts? What FCF numbers are you using to arrive at this multiple? Link to comment Share on other sites More sharing options...
decko Posted January 30, 2020 Share Posted January 30, 2020 Apologies, I failed to state that the 21x fcf to ent was a FY20' number, obviously a major omission. I think 19 FCF was 20.7b. I was taking a conservative approach to calculating 2020 fcf and using todays enterprise value. Or, paying 26X ent today. Question remains. Link to comment Share on other sites More sharing options...
Mephistopheles Posted January 30, 2020 Share Posted January 30, 2020 If you add back the $5 billion (non-tax deductible) FTC settlement, then the pre-tax income is $30 billion for the year and net income is $23.5 billion. It's about a $600 billion market cap today. So that's about 20x pre-tax or 26x net earnings. Not too bad with revenue growing in the high 20s. I'm dissapointed with the expense growth and looks like they're guiding for that continuing. Most of it is in headcount and the massive capex budget which is data centers, etc. I imagine at some point the operating leverage will kick in and spending stabilizes. Seems like a "wonderful" business at a fair price. Though, I think it's a net negative for society thus greater govt crackdown, so I might just sell it at some point. Link to comment Share on other sites More sharing options...
Saluki Posted January 30, 2020 Share Posted January 30, 2020 I added a little on the dip today. It's a great company at an fair price, as Buffett would say. As an advertising platform, it's even better than Google because it has access to so much user info that they can charge more for the ads ("I want my facebook ads to be seen by women with college degrees in the 3 most expensive area codes in greenwich connecticut, who are between 30 and 35 and like the band Trans Siberian Orchestra"). If I woke up tomorrow and Delta Airlines didn't exist, I probaby wouldn't even notice. But if there were no Facebook (or Google) and I had to use only LinkedIn for Social Media or Bing (*shudder*) for search, I would definitely notice. Talk about a moat! Link to comment Share on other sites More sharing options...
Jurgis Posted January 30, 2020 Share Posted January 30, 2020 Apologies, I failed to state that the 21x fcf to ent was a FY20' number, obviously a major omission. I think 19 FCF was 20.7b. I was taking a conservative approach to calculating 2020 fcf and using todays enterprise value. Or, paying 26X ent today. Question remains. OK, now that's consistent with what I see. To answer your question, it might be OKish purchase. I bought my position at lower prices. I am not currently adding, but that's just me. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now