I/O Fund’s Portfolio Manager Knox Ridley spoke to Nicole Petallides from the TD Ameritrade Network. He rightly predicted that Meta Platforms (Facebook) would be under significant pressure and Snap would be a winner. Here’s an overview of the discussion.
Why did Meta Platforms shares fall?
I/O Fund has followed Facebook’s business model for the past 3-4 years. We had warned our readers that the company’s business depends on Apple. Most people think that Facebook is an ad company with about 2 billion daily active users (DAUs). They monetize that data and do ads which is accurate. However, most people do not realize that the growth that has made them the powerhouse was because of the third-party data from Apple. Our stance is that Apple owns the real estate on iOS, and everyone else is renting.
“The reality is that Apple built the ecosystem and it’s theirs to monetize as they see fit. In this equation, consumers matter too, and data should not have been collected without permission in the first place.”
Apple changed the landscape by altering IDFA, a unique id within your iPhone that allows advertisers to track your behavior. So, Facebook combined this data and their data and sold the most valuable consumer data. We knew that Apple would take away this data and the Wall Street Analysts ignored this critical risk. I/O Fund's research process, which gives importance to the company's technical aspects like the products, is the clear winner in the long term.
Will you buy Meta stock?
The story of Facebook has materially changed. Everyone likes to focus on the financials like the cash flow and the balance sheet. However, to identify the winners in tech investing, you need to understand the product very well.
In the case of Facebook, the product that has helped to get the cash has been changed materially. They have mentioned in their earnings call that the impact of the iOS changes will be around $10 billion. This is a significant chunk of revenue. Few investors are buying the dip due to the Metaverse. We believe that it will take a few years before Metaverse can be effectively monetized and also Facebook’s history of entering new businesses is not that great. So, we will not be buying the dip.
Often, Wall Street Analysts find it difficult to differentiate companies that will outperform as they don’t have the technical knowledge to understand the products. This distinguishes our company from the competitors as we successfully manage a tech-focused portfolio. Sign up for I/O Fund's free newsletter with gains of up to 1100% - Click hereSign up for I/O Fund's free newsletter with gains of up to 1100% - Click hereClick here
