What Does The Giphy Deal Block Mean For Meta's Business Outlook

Seeking Alpha2021-12-15

Summary The Giphy deal getting blocked brings antitrust issues for Meta Platforms into the spotlight; the Federal Trade Commission also wants FB to dispose of its interests in Instagram and WhatsApp....

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senglee
2021-12-15
senglee
Okok
- senglee:
  ok
冲冲高
2021-12-15
冲冲高
Like
AmandaWee
2021-12-15
AmandaWee
like pls
- 冲冲高:
  K
- anqiju:
  Done
Soephiee
2021-12-15
Soephiee
Metaverse!
- ClickLike:
  buy buy buy
Ghuna
2021-12-15
Ghuna
Like pls
ivy888
2021-12-15
ivy888
Like

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhat Does The Giphy Deal Block Mean For Meta's Business Outlook\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-12-15 11:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4475242-giphy-deal-block-meta-business-outlook><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nThe Giphy deal getting blocked brings antitrust issues for Meta Platforms into the spotlight; the Federal Trade Commission also wants FB to dispose of its interests in Instagram and WhatsApp....</p>\n\n<a href=\"https://seekingalpha.com/article/4475242-giphy-deal-block-meta-business-outlook\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":null,"symbol_name":null,"start_time":0,"source_url":"https://seekingalpha.com/article/4475242-giphy-deal-block-meta-business-outlook","article_id":"1102037947","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1102037947","pubTimestamp":1639539908,"columns":[],"sourceInfo":null,"weMediaInfo":null,"summary":"Summary\n\nThe Giphy deal getting blocked brings antitrust issues for Meta Platforms into the spotligh","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{},"translate_title":"Giphy交易受阻对Meta的业务前景意味着什么","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FB":0.9},"content_text":"Summary\n\nThe Giphy deal getting blocked brings antitrust issues for Meta Platforms into the spotlight; the Federal Trade Commission also wants FB to dispose of its interests in Instagram and WhatsApp.\nI am still positive on Meta's intermediate-term business outlook. The key thing to note is that FB will likely focus more on organic growth rather than mergers or acquisitions.\nI still rate Meta's shares as a Buy, as I don't expect the Giphy deal to have a negative impact on the company's business outlook.\n\nFritz Jorgensen/iStock Editorial via Getty Images\nElevator Pitch\nI retain my Buy rating for Meta Platforms, Inc. (FB). In my previous article for FB published on October 7, 2021, I touched on Meta Platforms' five-year outlook. In this latest article, I focus my attention on the Giphy deal being blocked and discuss how this might potentially affect FB's future growth prospects.\nThe Giphy deal brings the market's attention to antitrust issues for FB, and it is noteworthy that Meta Platforms has already shifted its focus to organic growth initiatives prior to this recent regulatory development. The Giphy deal being blocked has not changed my positive views of Meta Platforms' outlook, and I still maintain a Buy investment rating for FB in views of its valuations and growth prospects.\nWhy Was Meta Ordered To Sell Giphy?\nSeeking Alpha News reported at the end of last month that Meta Platforms \"was told by the U.K. Competition and Markets Authority that it must sell Giphy, the largest provider of animated images to social networks.\" In the news article, it was stated that the U.K. Competition and Markets Authority made the decision to order FB to sell Giphy on the basis that \"Meta's acquisition of Giphy would reduce competition\" or \"limit other platforms' access to Giphy gifs.\"\nIt is possible to draw a parallel between the U.K. Competition and Markets Authority's decision on the Giphy deal, and the Federal Trade Commission's antitrust case with regards to Meta Platforms' prior acquisitions of WhatsApp and Instagram.\nAn August 19, 2021 Reuters article mentioned that the Federal Trade Commission \"refreshed its antitrust case against\" FB and is \"once again asking a judge to force the social media giant to sell Instagram and WhatsApp.\" In the Federal Trade Commission's official press release published on the same day, it was emphasized that Meta Platforms \"resorted to illegal buy-or-bury scheme to crush competition after a string of failed attempts to innovate.\"\nIn other words, it is clear that the UK regulators have blocked Meta Platforms' acquisition of Giphy due to antitrust issues, which is also exactly why FB has been targeted by the Federal Trade Commission for its previous M&A deals. This latest development has a meaningful influence on FB's growth strategies, which I address in the next section of this article.\nWhat Is Meta Platforms' Business Outlook?\nI highlighted in my early-October 2021 article that \"I am positive on Facebook's (Meta Platform's former corporate name) growth prospects in the next five years\" and stressed that \"I view the sell-side's expectations of mid-teens earnings growth over this period as reasonable.\"\nMy positive view of Meta Platforms' business outlook remains unchanged, but I think that FB has to further optimize its growth strategies in response to the Giphy deal block and antitrust issues in general. Specifically, Meta Platforms has to focus more on organic growth (e.g. product innovation) and be less reliant on inorganic growth (e.g. mergers & acquisitions). The good news is that Meta Platforms has already started to pivot towards organic growth strategies way before the UK regulators' latest decision on Giphy.\nANew York Times article published on August 12, 2019 noted that FB \"halted acquisition talks with Houseparty, a video-focused social network in Silicon Valley, for fear of inciting antitrust concerns.\" Instead of engaging in M&A, Meta Platforms has chosen to pursue new product innovations. Examples of these new organic growth initiatives include Facebook Shops (mobile shopping) and Instagram Reels (short-form videos) which were officially launched in May 2020 and August 2020, respectively. The recent Giphy deal only makes it more likely that Meta Platforms will prioritize organic investments over mergers and acquisitions.\nSeparately, the Metaverse is a new growth area that Meta Platforms intends to focus on. In a Founders' Letter published on October 28, 2021, CEO Mark Zuckerberg noted that he hopes that \"the Metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce\" in the next 10 years, and he emphasized that FB \"built our business to support very large and long term investments to build better services\" in that respect. This seems to imply that Meta Platforms is prepared to make significant investments to drive the company's future growth relating to the Metaverse. More importantly, FB's investments related to the Metaverse are likely to be organic in nature, rather than mergers and acquisitions.\nEarlier, Meta Platforms mentioned at the company's Q3 2021 results call that it is \"building multiple generations of our VR and AR products at the same time\", and its other Metaverse-related investments include \"a new operating system and development model, a digital commerce platform, content studios, and of course a social platform.\" FB also guided at the recent quarterly investor briefing that \"these investments (are expected) to reduce our overall operating profit by approximately $10 billion\" in 2021, and should \"grow even further for each of the next several years.\"\nLooking at Meta Platform's historical capital expenditures and its expected capital expenditures in the future (as per sell-side' consensus estimates) tells a similar story. According to S&P Capital IQ data, FB's historical capital expenditures only increased by +8.5% and +0.1% in fiscal 2019 and fiscal 2020, respectively. But market consensus expects Meta Platform's future capital expenditures to grow by +26% and +51% to $19.0 billion and $28.7 billion for FY 2021 and FY 2022, respectively. In addition, sell-side analysts see FB's annual capital expenditures remaining elevated at around the $30 billion mark between fiscal 2023 and 2025. Although it is unclear whether the Wall Street analysts had included any potential mergers and acquisitions as part of their respective capital expenditure forecasts, it will be reasonable to expect that the majority of FB's capital expenditures in the near-to-intermediate term will be organic growth initiatives due to antitrust risks.\nIn my October 7, 2021, article, I noted that the company's \"future revenue growth is expected to be supported by the expansion of the digital advertising market, and an increase in price per ad driven by new product features.\" Given the Giphy deal block, I see Meta Platforms continuing to invest heavily in organic growth initiatives. These investments will be supportive of FB's top line and bottom line growth in the mid-teens percentage range (FY 2022 earnings growth is an exception due to the high base in FY 2021) for the next few years as per market consensus' expectations (in the chart below) which I think are realistic.\nFB's Consensus Revenue And Earnings Per Share Forecasts\n\nSource: Seeking Alpha's Earnings Estimates Page For Meta Platforms\nLastly, I am not too concerned about the Federal Trade Commission's antitrust case and its impact on Meta Platform's business outlook. Such legal cases tend to be long and drawn out, and it is uncertain if it is in the best interests of consumers that WhatsApp and Instagram either become independent of FB or be acquired by other entities.\nIs FB Stock A Buy, Sell, Or Hold?\nFB stock is still a Buy.\nThe Giphy deal block only implies that Meta Platforms will largely stay away from mergers and acquisitions as a means of growth. Instead, FB is most probably going to allocate more capital to organic investments with the aim of introducing new products and capitalizing on growth opportunities associated with the Metaverse.\nFB is currently valued by the market at consensus forward fiscal 2022 and 2023 P/E multiples of 23.2 times and 19.7 times, respectively. I view Meta Platforms' current valuations as undemanding for a company that can deliver earnings growth in the mid-teens percentage levels and return on assets or ROAs in the high-teens percentage levels (as per S&P Capital IQ's consensus financial forecasts). As such, I continue to assign a Buy rating to Meta Platforms' shares.\nThe key risk factors for Meta Platforms include further antitrust investigations relating to the company's past acquisitions, and new organic investments failing to achieve the desired results for the 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