The Investor Diary Entry #10: January 30, 2023
I have invested 4 chunks in META with the first chunk being invested when the price was overvalued at $303 and with the last chunk at a price of $99. I am facing what I call the mysterious case of META stock price today.
META is still undervalued in my calculation as of today, but I believe that META is going to face extreme challenges in the short and medium terms. I believe that those challenges will even put question marks on the existence of the whole company.
Still, I do believe that META is going to overcome those challenges and stay alive.
META Platforms Inc Stock Price
I am writing this article while we are a couple of hours pre-market. The price now is around $149. My average price sits at $164.
In the same manner that I studied Nvidia yesterday, I studied Meta Platforms inc stock price today. When I check Meta Platforms against the criteria that I use, Meta passes with flying colors. Meta is a solid company that anyone wishes to have a stake in including myself.
My mistake was that I invested in Meta when I was literally in my early days of investing. There was a school – I was following them for a while – they preached about growth companies. That school says; if one finds a growth company, one should invest in that company regardless of time and stock price.
Their methodology depends on the fact that since it is a growth company then it should grow from its current price point to higher positions thus bringing higher returns for its investors. After a couple of months I ditched this school and their thought altogether, and got myself introduced to the world of value investing.
During those couple of months I had already put money in some companies, and one of them was Meta Platforms.
My META Platforms Stock Analysis
My assumptions of the future regarding the factors that I normally study are going to be made in three modes; Low, Medium and high and for the next 7 years.
Revenue Growth: 5%, 7% and 9%. This was my second thought. I actually started with 3%, 5% and 7%. This is all based on the way I see the short and medium terms for Meta.
Profit and Free Cashflow (FCF) margins: 20%, 22% and 24%. Again what I expect Meta will face will affect its margins directly. Here, I would like to say that I feel that Meta has put itself in a corner with respect to its Metaverse enthusiasm. If it kept on investing in the metaverse, it will for sure affect its margins. If it stopped or even just slowed its metaverse investments, it will affect its reputation and accordingly the investors’ faith in the company and a sell off could be eminent in this case.
P/E and P/FCF: 14, 16 and 18
Finally, I have included a return of 12.5% in my calculations.
My own fair value for Meta platforms came out as follows from high to low: $200.51, $151 and $112.23.
How To Treat Meta Platforms
From the above fair price calculation, one would normally consider this as a great chance to invest as if investing in an ETF. Meaning, to keep investing in it as long as it is undervalued.
Unfortunately I cannot do that because of the reasons I mentioned above. I feel Meta is going to face heavy challenges in the short and medium terms, and this is preventing me from currently investing more in this company other than what I have already invested.
Another factor for my hesitation could most probably be psychological. Meaning that since my first chunk was a mistake and at an overvalued price, I am afraid to invest more in this company to find out that its price crashed as per my expectations. The funny thing is that it is still trading below my invested average price.
My Options On Meta Platform Position
My first option is to keep the position as it is and see how it plays off. If it crashed then buy more, and if it moved up keep it running.
The second option is to wait until it gets above my average price and sell it off. If and when it crashes, I will load up at the crashed price.
Currently I have a buy notification at $15. This is where I expect Meta to reach.
Today while Meta stock price is still below my average cost, my mind is settled, but when it reaches above the average price this is when it will get really challenging.
If I left things without choosing an option, I will get really confused when the price goes up. The best thing to do is to make a choice while the price is still below my average cost. For sure, I will not make this decision while writing this article.
I am sure that I will have a diary entry here if Meta stock price went above $164.
Conclusion
The Mysterious case of Meta stock price today, is not the only case that I am facing with my portfolio. I have other cases that are similar and one of them is Ali Baba stock position. Ali Baba stock position is a real dilemma for me since it is already above my average price.
For different reasons, but what I am expecting for Meta I am also expecting for Ali Baba. The difference here is that I need to make a decision about Ali Baba now. The good news is that I can learn from the decision that I reach regarding Ali Baba and apply it to Meta and any other similar positions.
The Investor
Monday 30 January 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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