J Studios
Performance Assessment
I had a 'Neutral/Hold' stance before Meta's (NASDAQ:META) Q1 FY25 earnings, but since that release, META stock has printed some outperformance vs the S&P500:
Thesis
I still struggle to see a clear bull case for
Meta: Early Warning Signs Of Excessive Capex Spends Like In 2022
Summary
- Meta's revenue growth is decelerating and there are ad spend headwinds in the EU and APAC that can impact performance in upcoming quarters.
- I am surprised to see Meta still spending aggressively on data center capex not just this year but likely next year too. I am concerned about FCF margin erosion.
- The numbers show that capex investments thus far have not yet translated to better monetization. And it may not happen soon either as new AI model launches are getting delayed.
- META stock has become even more expensive and there is minimal margin of safety for buys. META vs SPX500 charts also show diminishing bullish strength.
- I have some concerns about whether we are seeing the start of uber-aggressive capex spends without sufficient ROI; a repeat of its Metaverse blunder in 2022.
Providing alpha-generating investment ideas. I am an independent investor managing my family's portfolio, primarily via a Self Managed Super Fund. You can expect my articles to deliver a clearly structured, evidence-based thesis. But first and foremost, I encourage readers to judge me on my performance.I have a generalist approach as I explore, analyze and invest in any sector so long there is perceived alpha potential vs the S&P500. The typical holding period ranges between a few quarters to multiple years.It is a good idea to review the ratings history for the articles published by authors. This gives you another indication of how often the author's recommendations work out, which is a proxy for genuine investing and alpha-generating skill.Associated with Seeking Alpha account VishValue Research.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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