Below are my two senses when it comes to META heading into earnings.
The current bear case for meta heading into earnings are CAPEX trajectory, execution around their current ai (MUSE), and slow down on advertising. Last earnings META raised their lower bound of its capex guidance (annual). From 125-145 to 130-145 this is in billions btw. Reading his tweet about potentially slowing down on AI zuck double down saying that them delaying (MUSE) was so they could train their model safely “meta delayed shipping muse for several months to focus on safety and security”. Note this doesn’t mention anything about privacy concerns which META is notoriously known for, exposing themselves to lawsuits which is not if but when, and how extreme states will go forward. They already settled with 18 billion in their recent teen social media addiction. This doesn’t mean their FCF will go negative next earnings but we gotta take into account that their FCF is already being devoured by their CAPEX spending. For contrast last earnings their FCF dropped to 1.29% of their total revenue.
Keep in mind Meta is a tech company; it’s supposed to be light on CAPEX. Light weight to compensate for their evaluations’ high margins and low debt/expenses. Their cash cow is advertising, any weakness in advertising and shit hits the fan. Going back to CAPEX last quarter it’s swallowed 97% of their operating cash flow. Meta is gambling on ai almost to the point that it’s reckless which is why it drops so much when they announce capex increases. Switching topics to ROI, meta monetizes their ai by feeding it to ad algorithms/recommendation algorithms. In short this means that meta monetizes their ai by internally optimizing their ad algorithm. This means ai is better at picking shit to recommend to you rather than you paying meta to use their ai. Which you can do btw but the first option is how meta is currently optimizing their ai. With the release of MUSE meta s trying to monetize their ai directly which is a step in the right direction (their stock price proves my point) but you should be skeptical.
As of now most of these companies monetize their capex spending by either selling excess computing power or entering into the cloud business. Amazon with AWS, Microsoft with Azure etc. Now going over Zucks twitter he’s announced that Muse has teamed up with Shopify and more partnerships are coming soon (bullish, too bullish to the point he might be overcompensating so he can drop a fucking nuke on earnings day). Amazon has blocked Muse btw.
Lastly I truly believe meta will entered into the cloud business. It’s not if but when, this Q3 definitely not next Q3 perhaps.
Now the fun part. Technical analysis, we are currently seeing a quadruple airstrike signal first 3 has gone by i repeat Zuck will drop a fucking NUKE. That’ll make today’s 13% increase be a fucking joke (bearish).
I forgot to mention that Muse is nothing revolutionary. Amazon has their own ai that recommends shit for you to buy. Muse right now is just hype. Yes, they’re capturing market share but at what cost ? Burning millions on tokens means they’re setting money on fire for the sake of market share. I tried muse ai and it’s kinda mediocre, I will contradict myself by saying them building shit is a lot better than not having even trying this is their only way to stay competitive. Advertising is very competitive and them seeking olive branches to branch out is very good.
Yes the meta verse was a fucking joke. But meta rewards long term investors. I can’t wait to drop 140k on LEAPS when Zuck drops the nuke (I’m planning 1/15/2028 calls strike $600 or lower if the market reacts how I think it’ll react next earnings)