*This is sponsored advertising content and the disclaimer at the bottom of this email MUST be read carefully.
Good Morning Everyone!
I don’t know who needs to hear this but Meta's net income has fallen in 3 consecutive quarters. They've gone from $10.28 billion in Q4 2021 to $4.4 billion in Q3 2022. And I don’t think the metaverse will save them.
MARKET UPDATE
Looks like the Fed will pause after December
FAAMG being judged by their ability to manage costs/margins in a challenging revenue environment (FX and macro headwinds)
Meta, Google and Microsoft sold off. Where does the money go when investors are already defensively positioned (high cash, low leverage)?
U.S. GDP grew at 2.6% annual rate in Q3
ECB raises rate by 75 basis points to 2%
Crude 89 +1%
Meta -20% Anger at management capital allocation
Core Business is o.k.
Engagement still strong (see below chart)
3.7 billion people used one of Meta’s products including Facebook, Instagram & WhatsApp.
Time spent is up for Facebook and Instagram.
However, investors not happy about capital allocation that produce little revenue.
2023 expense guide was much higher than expected
Meta in the beginning of an Investment Cycle (A.I. to power Reels, Data Centre Servers, Metaverse).
In light of weaker macro, they did not pull back on their investments.
If Zuck cut expenses, stock would have been up 14%.
Guidance for 2023 opex of $96-$101 billion vs street at $90 billion, up from $85-87 billion in 2022
Guidance for capex of $34-39 billion vs street at high $20s and up from $32-33 billion in 2022
Free cash flow missed by $5 billion
EPS missed street by 40%
Stock now trading at 12 x buyside 2023 EPS
China Covid
China on Thursday reported a third straight day of more than 1,000 new COVID cases nationwide
Earnings
ServiceNow +11%
Ford
O’Reilly
Mastercard – cross border +125% of 2019 levels
Merck
Shell
McDonalds
Comcast
Honeywell
Caterpillar $3.95 vs $3.16 street
Tonight
Apple – conference call at 5 p.m.
Amazon – conference call at 5:30 p.m.
Intel – call at 5 p.m.
T-Mobile – call at 4:30 p.m.
CRYPTO UPDATE
Hong Kong will reportedly overturn crypto rules
2018 – effectively limited crypto platforms to institutional investors worth +$1 million
New rules would makes crypto trading legal fro retail investors in the city
Program expected to launch March 2023
Nearly $1 billion was liquidated overnight this week during rally
87% of which were short positions
$550 million in Bitcoin
$476 million in Ethereum
Strong performance over the past week:
MEME OF THE DAY
Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
Grit Capital Corporation is a publisher of financial information, not an investment advisor. We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.
By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.
Gritcapital.substack.com (“Grit”) is a website owned and operated by Substack. Grit is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Grit in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Grit is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Grit does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Grit does not verify the adequacy, accuracy or completeness of any information. Neither Grit nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Grit nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.