Meta Q3 - More Metaverse Spend

Investors are very interested to see what is happening under the Meta Platforms hood. After Wednesday's results release, the market did not like what it saw. Revenues were down 4%, costs were up 19% and users only increased by 4%. The stock tumbled 24% on Thursday. Ouch.

It seems Mark Zuckerberg is hell-bent on building the Metaverse at breakneck speed. Guidance for expenses are looking to increase from $85 billion in 2022 to $100 billion in 2023. The company has employed 19 000 more people versus this time last year, an increase of 28%. If they succeed and manage to corner the virtual world, then this of course was money well spent. But clearly the market is not convinced.

The operating business had a decent quarter. Ad revenue beat expectations thanks to positive trends from Reels. However, the macro environment is tough and advertising spending is one of the first items to be cut. The stronger dollar does not help either.

Meta has over 3.7 billion monthly users on their family of apps and trades at 10 times earnings. The stock is in deep value territory. They are betting the house on an unproven concept. We are keeping a very close eye on their progress and may suggest a sell if we feel there is no light at the end of the virtual tunnel. But for now you should hold the stock as we feel the existing business is undervalued.