Metaverse ETF Shorts Facebook Despite Promise of 30% Gains (What They Got Wrong)
Meta Platforms Inc.‘s (FB) reputation is under fire.
This week, my inbox was flooded with questions about the stock after Michael Auerbach of Subversive Metaverse ETF (PUNK) announced the ETF’s permanent short position on FB, despite going all-in on everything else metaverse.
That’s a bad move, Mr. Auerbach.
Sure, Meta has had a rough start to 2022 after missing analyst expectations on its Q4/2021 earnings. But that doesn’t mean you should leave Meta, a one of the largest social media companies in the world that touts a 33% profit margin, should be left off your portfolio.
On the contrary, FB is still a buy.
03/25/2022 Buy, Sell, or Hold Transcript
Hey! Shah Gilani here with your Friday BS.H, that’s Buy, Sell, or Hold.
You guys have sent in some interesting stocks this week. You send in interesting stocks every week. So I’m going to go to the core. What did you guys ask a lot about this week? The FAANGs. So let’s go right to the heart of the matter.
First up, Facebook – or the company formerly known as Facebook, Meta Platforms Inc. (FB). It still has the symbol FB – gonna eventually change that.
What is Facebook right now? It’s a buy, people. Why is it a buy? Because, first of all, it is the largest social networking/social media company on the planet, and nothing is ever going to come close to Facebook. With WhatsApp, with Instagram, with Facebook Messenger, with 2.912 billion active monthly users, Facebook is it.
Tremendous revenues, $117 plus billion a year, profit margins at 30… I’ll give you the exact number, 33.38% profit margin. Incredibly profitable net income available to common shareholders, $39.37 billion. Yes, you want to own Facebook because it’s a great company and because it has fallen off a ledge. Facebook was trading at $380 back in September of last year. It’s now trading around $219 and change. There’s a gap that it has to fill from falling out of bed. That gap is $290. So, I think Facebook can easily get from $219 back up to $290, which is a nice 30% move for you.
I want to own Facebook down here. I recommend you buy Facebook down here for that gap-filling opportunity. That’s a nice little place to start. If the market firms up, then Facebook is going to go higher from there. The market firms up, it’s definitely going to fill that gap. And, if you’re nervous about that, you need to put a 10% or 15% (I prefer a 20%) stop on Facebook. Cause I like Facebook. And I think if the market firms up – which we’re not really close to it doing yet – is going to go a lot higher. But right now, I’d like to play that gap with Facebook, and I think this is the time to try it. Put a nice stop on there, so if the market does come apart, Facebook will probably come part, everything will probably come apart with it. But now Facebook is the buy down here.
Next up Amazon.com (AMZN).
You all know who Amazon is, what they do, how big they are. Amazon is the bomb. It is gigantic. It is still making tons of money. It is still growing. It’s growing its top line. It’s growing its bottom line. It’s got revenue growth. It’s got earnings growth. Amazon’s still cooking, people. But I think right now it’s a hold.
Why is it a hold? Because it’s been going sideways since really July of 2020.
Amazon, as nice as it looks in the long-term, it’s just in this kind of weird funky trading range between $2,800 on the bottom and $3,800 on the top. So, I’m not sure why anybody would jump into Amazon here right now at around $3,245 if you’re trying to get to $3,800… Too much risk given the market, given the fact that would have to break out from there. And there are other places to put your money right now that are moving better, that have more momentum than Amazon does.
If you own it, it’s a hold, people. It’s not a buy here. Would I buy down $2,800? Yes, I would. Would I probably sell it at $3,800? Probably. Probably, if I sold it and I thought the market was going higher, I would then buy some calls to see if I could play a little more extra upside. But, yeah, I think you can trade it between $2,800 and $3,800 all day. If you own it, it’s a hold. If you want to buy, wait till $2,800.
Next up Apple Inc. (AAPL). Yes. The giant of giants in the smartphone business. The products, whether you’re talking about the iPad or any of the products… I have the watch. I have an Apple computer. I have a bunch of their products. They’re all fabulous. The company’s fabulous. The revenues are insane. The profit margin is great. Apple. You got to love Apple.
Quarterly revenue growth… still hot at 11%. That’s the quarterly revenue growth based on last quarter. Quarterly earnings growth, 20%. So still growing, not like gangbusters, but drawing at a very nice clip.
It’s a hold. It’s a hold simply because it’s kind of like Amazon. Where’s it going to go?
It’s trading around $172. It’s recent highs: $180, thereabouts. So where’s it going to go? Is it going to get up back up to $180 and breakout? You’d like to think so – and it can – but I’m not going to buy it down here thinking it’s going to go there.
If I own it, I’m never going to sell it, so it’s absolutely a hold. If you own it, let it do what it’s going to do cause you’re going to want to own it in the long run.
Is it a buydown here? No. I don’t know where the upside is here (in terms of your gains) in the short run. So, Apple right here is a hold. On the downside, you can buy it between $140-$150 and maybe play it up to $180 if it gets up there. But I just think right now we’ve got to see where the market’s going to go. So, Apple is a hold if you own it. And if you’re looking for a place to buy, look at $140-$150.
But Apple being Apple, it’s now the bellwether of the tech sector. It has also become a bellwether for the whole market. A lot of investors have plowed capital into Apple as they’ve pulled out of other stocks, because Apple is such a stalwart in terms of the market, in terms of its growth, in terms of it being a go-to company and go-to stock.
If Apple goes down, it’s telling you that the market is likely to break down. The $140-$150 range is scary because, if we get down below there, Apple has broken down and people are going to get very nervous. Period. Me, if I don’t own Apple, I would still buy some down there at $140, but I wouldn’t buy all of it. I would see where the market’s going to go from there and buy some lower, because, in the long term, you want to own Apple.
Apple, right here though, is a hold, if you own it. It’s not a buy till you get down to $140.
Next up Netflix Inc. (NFLX).
You know what? Here’s another gap story. People, you want to buy Netflix for the same reason you want to buy Facebook here. It’s got a gap to fill, technically. And this is a company that’s making money. It’s not going out of business. It’s hugely profitable.
I don’t care if you think the growth is just gotten a little softer. Yes. All kinds of stuff has happened. There’s plenty of competition for what Netflix does. Yes. We know all that stuff, but the company is very profitable. So yes, I think you should buy Netflix down here.
The gap to fill is at $507. The stock is trading around $375, right now. That’s another 35% gain. If you get to fill that gap, you get 35% on the upside. And then, if you’ve made that that gap, chances are you’re going higher because that means probably the market is doing better. And people are going to look for the beaten-up stocks, which Netflix is one of them. And you’ve got further to go on the upside.
So, I liked Netflix down here. It’s a buy again. If you want to be cautious, put a 10% stop on it. That gives you a plenty of room. If you break down 10% from $375, you probably want to be out because the market may be going south. That’s a pretty easy risk/reward play, people. Risking 10% to make at least 35% all day long.
Last but not least. Alphabet Inc (GOOG), a.k.a. Google.
Love Google. Love the size. Love everything about the metrics. This company is just insanely profitable. Margins are insane. Everything about this company is, I think, fantastic.
However, to me, it’s just the hold here. Why? Because where’s Google going to go right now?
You’ve got the same backstory here. Interest rates are rising. We know that that’s on the back burner. Further increases from the Fed are coming. We know that. We don’t know how many for sure. Maybe six. Maybe some of them are going to be 50 basis points, more than the 25 that was originally expected. Maybe six times this year, maybe seven times. Nobody knows.
All we know is rates are rising. That’s not good for, again, the valuation metrics used to weigh the likes of these tech stocks. And so, Google is going to face that just like all the other tech stocks are going to face that. So, I’m not sure where Google is going to go.
From close to $2,800… Where’s it going to go? Back up to $3000? That’s a 7% gain from $2,800. I’m not going to buy Google down here for a 7% gain. Too much risk.
If it comes back down to $2,500, I’ll take a piece down there. But Google right now is a hold. If you own it, you’re very happy with it. You’ve been happy with it and you’re going to be happy holding it. But as far as buying it here for maybe a 7% gain and hope it breaks down to new highs… Not for me. It’s a hole. That’s it on the FAANGs today, everybody. I’ll catch you next week.