Despite all its problems, Facebook (FB) is still a lucrative money machine. For example, Meta Platforms Inc. (FB) reported a quarterly gross profit of $27.323 billion on 31 December 2021.
Impressively, Facebook’s quarterly gross profit rose from $22.862 billion on 31 December 2020 and $23.239 billion on 30 September 2021. Moreover, Facebook’s quarterly revenues rose from $28.072 on 31 December 2020 to $29.01 billion on 30 September 2021 to $33.671 billion on 31 December 2021.
In contrast, Facebook’s quarterly operating income fell from $12.775 billion on 31 December 2020 to $10.423 billion on 30 September 2021 to $12.585 billion on 31 December 2021. My guess is that the quarterly operating income fell because of COVID-19’s effect on advertising.
However, Statista estimates Meta (FB) generated $114.93 billion in advertising revenue in 2021. Facebook’s ad revenues grew from $84.169 billion in 2020 and $69.655 billion in 2019. I consider Facebook a pandemic-resistant business because of the advertising revenue.
How Much Cash Does Facebook (FB) generate?
Meta Platforms Inc. (NASDAQ: FB) generates enormous amounts of cash. For example, Meta reported a quarterly operating cash flow of $18.104 billion on 31 December 2021. Impressively, Meta’s quarterly operating cash flow grew from $14.04 billion on 31 December 2020 to $14.09 billion on 30 September 2021 to $18.104 billion on 31 December 2021.
Conversely, Facebook’s quarterly ending cash flow fell from $5.975 billion on 31 December 2020 to $2.061 billion on 31 December 2021. However, the quarterly ending cash flow rose to $19.891 billion on 31 March 2021 before falling to -$3.38 billion on 30 June 2021.
I think the quarterly ending cash flow fell because Facebook pays enormous amounts of debt. For example, Meta reported a quarterly financing cash flow of -$21.742 billion on 31 December 2021.
Notably, Facebook reported a net debt of -$47.908 billion on 31 December 2021. In contrast, the last Total Debt number I could find for Facebook was $13.219 billion on 30 September 2021. In 2021, Facebook’s total debt rose from $11.177 billion on 31 December 2021. Similarly, the net debt rose from -$52.335 billion.
Meta Platforms is still a cash-rich company despite the debt. Facebook had $47.998 billion in cash and short-term investments on 31 December 2021. The cash and short-term investments fell from $62.195 billion on 31 December 2020 and $58.720 billion on 30 September 2021.
Facebook is a Value Investment
Thus, I still consider Facebook (FB) a cash-rich company with enormous value. For example, Facebook had $165.987 billion in Total Assets on 31 December 2021. The total assets grew from $159.216 billion on 31 December 2020.
Moreover, I think Mr. Market undervalued Meta Platforms Inc. (FB) at $220.18 on 8 February 2022. Interestingly, Meta’s share price is falling. Mr. Market paid $266.58 for FB on 8 February 2021 and $377.58 for Meta on 8 September 2021.
Therefore, I think Meta Platforms is becoming a value investment. To explain, I consider Meta a value investment because it has enormous value, generates enormous amounts of cash, and has a falling share price.
Moreover, Meta still owns the largest social media ecosystem in the world. For example, Meta owns two social media platforms with other two billion active users.
The Meta Platforms have 7.578 billion active users
In detail, Facebook had 2.895 billion active users and WhatsApp had two billion active users in October 2021, Statista estimates. Hence, two Meta platforms had 4.895 billion active users.
Furthermore, two other Meta Platforms have over one billion users each. To elaborate, Statista estimates Instagram had 1.393 billion active users and Facebook Messenger had 1.3 billion active users in October 2021.
Hence, I estimate Meta Platforms had 7.578 billion active users in October 2021. Conversely, I am suspicious of those numbers. I suspect many of those users are duplicates because Worldometers estimates the world’s population at 7.9 billion people in February 2022.
To elaborate, I think about half the world’s population will never use social media. However, I think the data shows each member of the half that uses social media uses two or three Meta platforms.
In addition, I suspect there are tens of millions of bots, businesses, organizations, governments, fictional characters, and other synthetic entities with Facebook, Facebook Messenger, WhatsApp, and Instagram accounts.
Hence, I believe it is impossible to determine how many people use Meta Platforms. Yet, it is possible to measure all the cash and revenue Meta generates.
Meta Meets Buffett value criteria
Strangely, Meta (FB) meets an interesting Warren Buffett value characteristic. To explain, Uncle Warren famously likes companies that “somebody’s idiot nephew could run.”
Buffett’s excellent of understanding of human nature predicts an idiot will run most companies at some point. Therefore, the best companies will make money with an idiot in charge.
I think Meta Platforms could meet that criteria because I think CEO Mark Zuckerberg is behaving idiotically. For example, Zuckerberg changed the name of his company to Meta Platforms. I think Meta resembles the names of the erectile dysfunction medicines widely advertised on American television.
Moreover, Zuckerberg dropped one of the most successful brands in human history, Facebook, with 2.895 billion active users in favor of Meta. That sounds idiotic to me.
Other evidence of Zuckerberg’s stupidity includes the Metaverse nonsense and the investment in the questionable virtual reality (VR) company Oculus. Note: I’m in my fifties and I have been hearing that VR is the next big thing since I was in high school. Yet, VR is still far from widespread.
Personally, I suspect VR is too awkward to serve a mass audience. However, Zuckerberg believes it is the next big thing.
Meta Platforms is still a Moneymaker
If Facebook can survive Meta and Zuckerberg’s mismanagement and make money, it is an idiot-resistant company. That provides an extra level of value many investors ignore at their peril.
The only thing I dislike about Facebook (FB) is the lack of a dividend. I think a cash-rich company such as Facebook should pay a dividend. Unfortunately, investors refuse to force Silicon Valley companies to pay dividends even though some of them, I’m looking at you Alphabet (GOOG), have the means to do so. Hopefully, the falling stock price will force Facebook to pay dividends.
In the final analysis, Meta Platforms (FB) is still an excellent stock and a strong moneymaker despite the terrible new name. I advise all value investors to investigate Meta because it is a moneymaker, Mr. Market undervalues.
Originally published at https://marketmadhouse.com on February 8, 2022.
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