Valens Credit Weekly Insights - 2024 06 11
Meta Platforms (META) is investing heavily to capitalize on the rapidly growing AI market. Uniform Accounting highlights the market's unwarranted pessimism about Meta's likelihood to succeed, while Meta's starting position, and track record, gives reason to think it will succeed, indicating equity upside.Meta has a strong track record of succeeding in its large investments. After spending a combined $20 billion on Instagram and WhatsApp, Meta was able to solidify itself as the largest social media company in the world. Today it is following a similar strategy as it invests in generative AI technology. As the business continues scaling this product and begins monetizing it, it should see significant growth, yet the market is pricing its growth and profitability to fall to its lowest levels in company history.
Meta's management team's significant stock ownership compared to salary and annual bonuses suggests they are aligned with shareholders.
Management confidence in the Q1 earnings call about the viability of AI and its ability to scale and monetize it supports ROA recovery and continued growth.
Facebook is building and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices. The company's products include: Facebook, which enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, which is a place where people can express themselves through photos, videos, and private messaging, and explore their interests in businesses, creators and communities; Messenger and WhatsApp, which are messaging applications; and Oculus, which connects people through its Oculus virtual reality products.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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